For many people, navigating the world of investment products and services is a daunting task. A stock broker can be a great way of saving time and effort by having a professional do the research and look after your finances. The process of selecting this individual can become as stressful and daunting as choosing a house or planning that perfect trip. You’ve worked hard for your money and you want it treated right, so read on and enjoy the tips!

The Individual

Stock brokers are salesmen. I don’t care what kind of qualifications they have, if they’re a trained accountant or an ex-banker, their job is to make money for their firm; plain and simple. That’s not necessarily a bad thing, just keep it in the back of your mind as part of your bull sh*t filter.

A good broker will ask you questions, lots and lots of questions. Personal ones about your income, expectations, risk tolerance and current financial plans. Without this information, it would be impossible for the broker to create a proper plan for you.

You should be asking the broker lots of questions too. Some good ones include:

• What is your background in the industry?
• What qualifications do you have (education/industry courses)
• How long have you been in the industry?

Ask that the broker create a proposal for your business. Don’t expect them to list every stock/bond they’d buy for you, but they should be providing what percentage of assets will be allocated to what kind of product/industry. For example:

70% Equity / 30% Fixed Income

In Equity: 20% financial, 10% Tech , etc….

Pay special attention to the kinds of products your broker recommends. There are usually two types of brokers:

1. Those who are just salesmen and lazy
2. The good ones

The lazy ones will try to put your equity positions in Mutual Funds. Mutual Funds are great if you are a small investor, say anywhere from 0 – 150k to 250k. If you have over $250,000 then the only Mutual Funds you should have in your portfolio are for international exposure. This is just my opinion, but why are you paying a broker commission/fees just so that they pass the buck to a fund company to manage your assets?

Make sure your broker is up front on all fees and charges. The current trend is to replace transactional commissions with a percentage charged of total assets. While usually this will net out to cost you more, it gives you the piece of mind that every trade idea will be in your best interest. You don’t have to wonder if the broker is making the recommendation in order to make a buck on a trade. As your account increases in value, so does his cut. Win/Win.

Lastly, don’t forget to take your time. Try to visit a few brokers at different firms. Try to get a feel by asking your questions and trust your gut. Just because you might have a referral, doesn’t mean the broker will be a good fit for you.

Happy Investing!