Brokers help make investing easier, as they are paid to handle the work for those that do not fully understand the process of doing so. The first broker, a person, chooses often varies greatly between the brokers utilized after years of making investment decisions. Choosing the right broker plays a major role in ensuring the most beneficial investments are made.
Types of Brokers
One broker does not fit all. There are a couple of different types of brokers that potential investors need to be aware of. There are two main types of brokers, including a regular broker and a broker-reseller.
The average broker works with his or her clients. They speak to them directly and help them make the best possible decisions. This often considered more reputable. People are often more willing to work this an average broker because they get to speak to them themselves and learn about the investment choices firsthand. Many are even part of recognized organizations. This option feels safer.
A broker-reseller is essentially in the middle of investments. They act as the go-between for clients and larger broker companies. Many are wary of this type of broker because they do not get to see the investment choices themselves. They have to rely on the word of someone else to bring the information to them.
There are also variations between the type of services brokers offer. A full-service broker handles everything there is to do with stocks and investing. They manage the accounts, offer advice and suggestions, and follow the research. They cost more to hire but are well worth it for all they have to offer. Many times, an account manager is assigned to each case to assist with investment decisions. The manager will discuss options with the account holder and learn what their investment goals are. They will then help these goals be achieved.
A discount broker does not offer full services. They do, however, provide quality service that is worth having. There is even an option to speak to a broker and gain advice on the trades within the account. It is a less expensive option that works just as well, especially for first-time investors who do not yet have the means to afford a full-service option.
Investors do not have to meet with a broker face-to-face. There is also the option of online trading. Many brokerage companies only operate online and offer the same incentives and fees. Many people enjoy this type of account because they can gain 24-hour access to their account information. It is also a cheaper alternative that does not cost as much to start up.
Stock news, quotes on pricing, research reports and more are readily available online. The quick access to this type of information is beneficial to many of those that understand what to do with it. It is another reason why so many choose online trading for their method.
Many brokers require minimum balances to be met before an account can be started. An online discount service commonly requires a $500 or $100 start-up fee. Full-service options will be more costly. This initial fee is applied one time.
Investors will want to discover the withdrawal fees associated with the brokerage accounts they are looking into. Many of them charge a fee for making withdrawals, especially right away. Others insist that the initial balance is kept inside, and do not let people withdraw if it will drop the account below that threshold. It is important to understand the fees and expectations so as not to be surprised down the line.
The type of investments people plans on making will play a significant role in determining the right broker for them. Someone that wants to trade regularly and avoid holding onto stocks for an extended period should seek an agent with lower fees. Otherwise, fees will often be paid to keep trades going. These traders will regularly be buying and selling stocks to gain a quick profit.
Someone willing to hold onto an investment needs to seek a broker with higher commission fees. This way, they can avoid paying monthly dues on something they know they will have for a long time to come. A one time fee, or even an annual amount, is a better option in this instance. They can focus on their investment, rather than worrying about regularly paying associated costs to keep the account going.
Children are obviously not able to have their accounts. Their parents can go ahead and create a custodial account that gives them access to all decisions. There are fee structures that can be put into place that allow teens to begin investing once they are ready to take on the responsibility. This can help prepare them for future investment decisions. Parents should be aware that the money in these accounts belongs to the children, and cannot be used at their leisure.
Becoming a Stockbroker
No matter which stockbroker a person chooses, it is important to note that all stockbrokers have certain requirements to meet in order to become one. Each individual is trained and able to do the job at hand. The Series 7 and Series 63 are two licensed exams that people must take to become certified as a broker. The Series 7 exam requires a passing score of 72 or better. It consists of six total test hours, broken into two sessions. More than 250 questions are on the test.
The Series 63 exam is much shorter. The test is done in 75 minutes. It only consists of 60 questions. More than 43 questions must be answered correctly to pass this exam, earning at least a 72 percent.
Choosing a broker does not need to be a tough decision. Thinking about the type of investments that will be made the most, the fees associated with the accounts, and the services offered can help new investors come to a quick decision regarding which broker to work with.