10 Ways to Size Up a Broker

Whether you're ready to open your first discount brokerage account or simply wondering if you're getting the best service for your money from your current one, here are 10 things to consider.

1. Trading commissions
Surprise! Cheaper is not always better. We know you've probably figured that out, but the price per trade at a discount broker may also indicate the level of customer service that comes with it. If you aren't trading in and out of stocks very often (and you shouldn't be), and you're not too concerned about whether your trade is executed within 15 seconds or two minutes (and you shouldn't be), there really isn't a significant difference among the brokers charging $7 to $20. If you go much cheaper than that, you may have trouble getting someone on the telephone to answer any questions you may have. And if you're paying much more than that, you should expect near-flawless service.

2. Other fees
You'll get a good idea of what we find important as far as additional fees are concerned in this comparison chart of our broker sponsors. Beyond the trading commissions, you'll find that brokerages may charge other fees, including fees for transferring assets into the account, fees for closing an account, IRA custodian fees, wire transfer fees, account inactivity fees, annual fees, and fees for not maintaining a minimum balance. If you know your needs, you won't end up paying for services you don't need.

3. Minimum initial deposit
If you're just starting out, consider what you'll be able to comfortably invest initially. Some brokers have account minimums, so find the one that best fits your budget. We have more on this topic here.

4. Customer service
For Fools, customer service is a biggie. If nothing else, you should put some time into researching a broker's service before you sign on the dotted line. In the case of discount brokers, customer service includes website performance and interface. Check out each brokerage's website. Is the interface intuitive? Can you find what you're looking for without having to click 65 links? Is it speedy? If talking to a live human is important to you, test their phone service. Does the brokerage answer the phone promptly? Is there an office nearby, just in case you need to talk face-to-face? (Not everyone does, but if that's important to you, put it down on your checklist.) You'll definitely want to see how the brokerage does at sending you all relevant material you ask for online.

Finally, check out The Motley Fool Discount Brokers discussion board for invaluable insight into the praise and complaints being put forth regarding each of the major brokerages. It's an active board, with many strong opinions. Understand that those with complaints are more likely to post their thoughts than satisfied customers.

5. Traditional banking services
This might not be tops on your list, but if you want to consolidate your PINs and pennies, think about looking for a brokerage account that can accommodate your banking needs. Many brokers now offer:

  • Money market sweeps
  • Check writing and bill payment
  • Visa cards
  • Direct deposit
  • ATM cards

Your cash will typically attract higher interest rates in a brokerage money market account versus the typical savings or checking account. Check out our banking area for more details.

6. Research
Some brokerages market their research as a real plus. That's fine, but you probably don't want to pay for it. There's plenty of research available on the Web (including right here at Fool.com). Some of the offerings include analyst reports, real-time quotes, and detailed financial data.

7. Mutual funds
No-load mutual funds can be purchased directly from mutual fund companies, so unless you're a mutual-fund trading addict, the availability of thousands of mutual funds in one location probably shouldn't affect which broker you choose. While you may purchase some no-load mutual funds from discount brokers without paying a transaction fee, some brokers do charge a fee for funds -- so be sure to check on this before making a purchase. And, of course, if there's a particular mutual fund family that you're set on using, make sure that the brokerage you select offers that family of funds.

8. Investment product selection
All the brokerages offer stocks traded on the major exchanges, and most will offer equity mutual funds. But there are a number of other investment vehicles that you may wish to use. If you're interested in risking your hard-earned moolah on over-the-counter (OTC) bulletin board stocks (shame on you!), you'll have to see which brokerages offer them. Other choices such as options, government bonds, corporate bonds, and the like are not available through every brokerage. Determine what you expect you'll need -- we're fans of just plain old stocks, especially if you're young -- and act accordingly.

9. Other methods of getting your trades executed
What if the Internet breaks? We'd all probably get a bit more exercise and sun now and then. Seriously, though, sometimes you may not have access to a computer. Check out whether the brokerages you're considering also have touch-tone phone trading, and how that works. Sometimes you just might want to place an order through a real, live person, and many discount brokerages offer that option, too.

10. Other freebies and perks
We wouldn't suggest making too big a deal about the freebies. After all, they are one-time things, and $100 or a new Koosh ball probably isn't going to be worth the hassle if you soon find that you've made the wrong choice and have to move your account elsewhere. Still, free money is free money (and Kooshes are a great way to relieve stress). So if you find yourself deadlocked on which brokerage to go with, cash (or some other perk) can be a persuasive tiebreaker.

Finally, remember this: If you're only making five, six, 10, even 20 trades in a year, the difference between paying $7 per trade and $20 per trade isn't significant. We think it's better to make customer service a priority and not sweat about most of the other stuff. After all, how much did you ever worry about which bank to open your first checking account with? The differences are about the same.


Read/Post Comments (36) | Recommend This Article (262)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 29, 2008, at 9:34 PM, GBastian wrote:

    Recently i transferred part of my acounts

    to Charles Schwab. I am pleased with their services but I did not see him listed with other brokers by you? If possible I would like to retain them without changing again. PS.I am dealing also with two other brokers one who holds my IRA investments and the othert

    administers an IRA annuity which was erroneously set up even though it is redundant.

  • Report this Comment On December 06, 2008, at 6:27 PM, OlderWisrSmarter wrote:

    I chose eTrade recently but would not recommend it to anyone. After transferring a thankfully small sum to them (since I had nothing more to trade with), I was informed the transfer would take 4 days. After that, I was told I would not have access to the funds for 7 days, during which time eTrade presumably uses my money to make gains before returning control of it to me. I was dismayed and called to close the account today; I will not be able to even start the process until the money clears.

    After reading the list of complaints on http://www.consumeraffairs.com/finance/etrade.html I am now worried I will not even be able to get my money back from them. These complaints are not old and I advise everyone to take a look at them before considering opening an eTrade account.

  • Report this Comment On December 19, 2008, at 10:02 PM, olee100 wrote:

    I've had good luck with Scott - reasonable easy to follow rules with live person. A bit of a wait to get first money going, but money direct is instant. Not everything Mac compatible.

  • Report this Comment On February 11, 2009, at 8:05 PM, chopper007 wrote:

    I was chatting to a fella the other day, I asked him what he did for a living, he said that he writes reviews and comments on websites to promote products, I was shocked !! how can I find a decent broker and trading platform with this knowledge, I can't afford to make any mistakes..I have a set amount to invest. and I want to make the right choices, someone should devise a market comparison site for this...

  • Report this Comment On March 22, 2009, at 12:37 AM, yaiwolf wrote:

    I've been in the market for 30 years and have used several of the discount brokers.

    I agree with the comments on getting excellent service and don't sweat the other small things.

    The best overall brokerage for me has been TDAmeritrade. They execute my trades quickly and no hassle when I need information from them. I like that.

    They offer a lot of additional investment information, charts, graphs,etc. Good stuff.

    I would rate them a solid overall B+

  • Report this Comment On April 04, 2009, at 7:43 PM, Philyogy wrote:

    I use ShareBuilder for a little over a year now... I like them... The customer service has been rather helpful on things.. I don't trade alot daily.. I do about 6-10 trades a month.. This is how I pace myself, and not chase after that golden stock of each day... So far my way is working for me.. I pay $12 a month and get 6 free trades and then only $2 a trade..

  • Report this Comment On April 26, 2009, at 5:58 PM, punitkg wrote:

    I maintain multiple accounts and depending upon what trade I do, I use the account that is best for that. I have got Charles Schwab, TradeKing and Firstrade ... Tradeking and Firstrade are cheap .. while Schwab has lot of good research provided so you can see how its benefiting to have multiple accounts.

    ---

    Analyst @ www.comparebroker.com

  • Report this Comment On May 30, 2009, at 1:45 AM, evalsmed wrote:

    I also had a terrible experience with e-trade and wouldn't recommend them to anyone. It took about two months to get my money back from them. Their customer service was atrocious.

  • Report this Comment On May 30, 2009, at 1:45 AM, evalsmed wrote:

    I should add that I am happy with Sharebuilder and have had no problems with them.

  • Report this Comment On June 26, 2009, at 7:42 AM, title44 wrote:

    Your article regarding choosing a broker is very good however, it is very difficult to get clear cut answers from brokers of how your funds are protected in case of bankruptcy. I would really like some straight to the point factual answers. I have asked 3 brokers these direct questions and each danced around the answer. When I asked to see this in writing they acted like this question had never come up. Could I be the only one in the country that has this concern? Is really possible that brokers do not train their customer representatives in this area. Currently I am with E-Trade so I would think that should explain my concern.

  • Report this Comment On July 29, 2009, at 9:38 PM, ack0605 wrote:

    I've been with e-trade for over a year and have never had a problem moving money in or out (after my initial deposit cleared MY bank). From there I can do an e-Trade “Quick Transfer” from my Wachovia bank account and it's immediately available for trades. Once it actually clears my Wachovia account it's then available for withdraw on my e-Trade ATM card free of charge. Sell a stock and it's also available for immediate withdraw.

    Even at the lowest trade level (<30 per Qtr) at 12.99 per trade you have great access to tools, streaming real-time quotes and market data, charts (including technicals), trading ideas, research, risk & portfolio analyzers plus bracketed and conditional trades. Compare carefully and you'll find this higher priced $12.99 is the best value.

  • Report this Comment On July 31, 2009, at 9:29 PM, syncrow wrote:

    I have been using E-Trade for several years and have been very satisfied with their professional and cordial service. I am very impressed with how they spend time with me and are very patient when answering my questions over the phone. I have several accounts with them and am able to move money to and from other institutions without any problems.

  • Report this Comment On September 03, 2009, at 6:37 AM, ccubed333 wrote:

    I'm living in South Korea and wondering if anyone has any suggestions as to which service might be best for me. Thanks.

  • Report this Comment On September 06, 2009, at 8:50 PM, Leej77 wrote:

    I am new to this whole stock trading business. Can anyone recommend which company may work best for a newbie? TDAmeritrade and ShareBuilder sounds pretty ideal too - but still without a clue. Any other supportive recommendations or suggestions will be greatly appreciated. Thanks for the hand, guys!

  • Report this Comment On October 06, 2009, at 11:11 AM, JohnQuill wrote:

    I started out investing over twenty-five years ago, when commissions were often close to or over a HUNDRED dollars per trade. About ten years ago, my original broker was absorbed by a larger brokerage, and then about five years ago, they were acquired by E-Trade.

    I've been pleased with E-Trade, especially since having a reasonable Interest Rate paid on my Sweep Account, and with having free (100% reimbursed) ATM fees. They also provided a simple-to-use RSA Security Device free of charge. But I don't look forward to being "forced" to learn another "system" if and when they ever get taken over!

    A little over a year ago, I believe things were already in motion such that the regular BANKS were about to attempt to "take over" most or all of the brokerage businesses, by offering ZERO commission trading. The recession seems to have put a "hold" on this idea, but I still wonder if it might happen. Once the banks "landed" a number of six-figure accounts, they probably could reduce commissions substantially.

    Meanwhile, it might help if all of the brokers and banks were to strive to have a similar front-end interface. If you switch brokers, it takes a while to navigate these, and this learning process is a huge inhibitor, especially when you include banking and Bill Pay systems and ALL of the data you frequently must re-enter.

  • Report this Comment On November 29, 2009, at 9:41 PM, Eugenester wrote:

    I'm a first time investor, and I started out with Sharebuilder since it's cheap, user-friendly, and pretty simple. So far its been pretty good, since I pay $12 a month for 6 automatic trades.

  • Report this Comment On December 24, 2009, at 6:36 PM, aleax wrote:

    @JohnQuill, "zero commission trading" is far from dead -- that's what I'm getting for up to 30 online stock or ETF trades a month (which meet all my needs -- I'm an investor, not a trader!-) from Bank of America as a "self-directed investor", with substantial minimums on the size of my accounts with them ($25K or so). (These are valid in California and may be different elsewhere).

    Their online investing site is being redone by Merrill Lynch these days -- waiting to see how it turns out... currently it's OK for simple trades stocks and ETFs (including limit orders), but kind hopeless for bonds and options (and I believe for trading on the margin, and for shorting, though I have no real interest in that kind of thing anyway) -- I wouldn't mind a cheap and usable site for occasionally selling covered calls (and other reasonably-simple option plays), bond trading, &c, but I want to keep my main stock/ETF trading at that $0-commission site (which also ties into my checking, savings, muni bonds, and CD accounts anyway;-)...

  • Report this Comment On February 05, 2010, at 4:34 AM, nickey2009 wrote:
  • Report this Comment On September 25, 2010, at 5:52 PM, investor82 wrote:

    I found similar info but a bit more detail on a few points here - http://www.thebestonlinebrokers.com/Selecting%20a%20Broker/d...

  • Report this Comment On November 28, 2010, at 1:33 AM, salmonriver wrote:

    I am currently with etrade with a portfolio of close to 25000 dollars that I have simply run amuck !!. my decisions to trade in small cap lasted as long as advise from near and afar had me selling as I headed for large. you can tell if it wernt for the fools I could just as well done it all in.At 10.00 bucks a trade,well Im not doing too well,so my question is -how do I switch my account to one that that isnt going to break me while I learn, if ever.? like options house or just2trade . again ,howdo I get from here to there.?

  • Report this Comment On December 05, 2010, at 10:36 PM, peterc48 wrote:

    I have been using Fidelity as this is who my employer uses to set up my 401k and other retirement plans. I have also set up my own small account there.

    After comparing prices, I was surprised that they were not mentioned. The price seems to be right, unless I am missing something, and the customer service seems to be good, unless I am missing something there as well.

    Any comments and/or advice would be greatly appreciated!

    Thanks!

  • Report this Comment On April 08, 2011, at 10:54 PM, lroberts04 wrote:

    I use a full service broker but negotiated the commission. They now charge me $ .05 a share. This works for me since my trades are seldom more than 200 shares.

  • Report this Comment On May 21, 2011, at 11:36 AM, mm5525 wrote:

    Since I sometimes use margin, I wanted to buy a newly minted MLP last summer, but since I had a margin balance at the time, I couldn't buy through my primary broker since this stock I wanted had a 100% requirement due to the newness/volatility. So I opened up an account with ScottTrade in order to buy it. Only after the account was opened did I find out they do not even offer Dividend Reinvestment Plans (DRPs). That is was a deal breaker for me. Also, there was some issue with when you got your dividends I can't exactly remember. Either they did not offer you check-writing ability/ATM cards, and/or when the dividend hits your account they only send out the check to you once a month. So if your dividend gets paid on the 5th, you have to wait until the 25th or something like that. If these issues are important to you, be sure you check out those policies.

  • Report this Comment On May 24, 2011, at 4:26 PM, rzbruckman wrote:

    Any fools out there with experience with Schwab?

    Interested to know both sides, recommendations and criticisms.

    Thanks

  • Report this Comment On May 24, 2011, at 9:37 PM, mm5525 wrote:

    Been with Schwab for a decade and absolutely have been pleased the entire time. $8.95 per trade is fine for the good service I get. In fact, I feel I'm treated like royalty. Constantly am thanked for my business. I love the free online seminars about all sorts of investing ideas, their trading software is super, and they do not charge for checks even when you order a box of 100, and they're the types that give you the carbon copy of the check you wrote underneath, which helps in record keeping. My bank charges me $20 a pop for ordering checks. Chuck doesn't charge a cent. I like the fact there's a local office, too. I have no critcism of Chuck in my decade with them. I used to think the commissions were too high, but they have lowered that to be competitive with everyone else. I have been very happy with Schwab.

  • Report this Comment On September 25, 2011, at 1:38 PM, Bluewaters2u wrote:

    While trading on a ETrade, Scott Trade or TDWaterhouse platforms, they can give the Day trader a certain amount of independence built within their trade pic's..But, lack the service end that a Charles Schwab or JP Morgan can give you through their Wealth Mangers/Brokers..If your a no-non sense trader like myself that does need the Tools of a full Blown Service minded Broker ...Then I highly recommend the above Platforms for Trading...Remeber..it is all about you and your money no matter What platform you choose..good luck guys..Blue

    http://wp.me/pYDbW-3a .

  • Report this Comment On March 31, 2012, at 6:25 PM, kscmhk wrote:

    I wish I'd seen this blog before last summer. With family advice, I invested w/ Edward Jones. They put me into mutual funds,bonds,and treasuries. They frowned on individual stocks. Commission was well over $ 4000.00. Since then, I've been studying anything I can on individual stocks. If it weren't for Some of the Motley Fool picks , that I purchased since, I'd still be underwater.( Edward Jones commission on individual stocks were over $200.00 a trade. ) It makes me ill to think of what it's going to cost me in commissions when it's time to sell anything. In Edward Jones defense, I will say they were very professional and were right there when I finally learned what questions to ask.

  • Report this Comment On January 24, 2013, at 2:11 PM, Sashquash wrote:

    Does anyone have experience with Rymond James-good or bad? Thanks

  • Report this Comment On March 23, 2013, at 1:08 AM, pepper56 wrote:

    I just retired from my job in Dec/12 and invested some of my 401/k with edwards jones. I'm new at this so they were recommended by a friend. I was surprised at the fees but they are professional. I echo kscmhk by saying what will it cost me in commission to manage my ira annuity?

  • Report this Comment On March 27, 2013, at 12:36 PM, Lync0h47 wrote:

    Thank you for this. This is really helpful!

  • Report this Comment On October 31, 2013, at 3:32 PM, stratman2k wrote:

    I have traded with Bank America, Merrill Lynch, Smith Barney (full service) and UBS (full service). I currently have accounts with UBS and Fidelity. I appreciate Fidelity a great deal. The online resources are great, they have an active trader app, no fee etfs, lots of phone support, and online seminars. Online trades are $7.95. If you need wealth management they have that too.

  • Report this Comment On March 30, 2014, at 12:13 PM, RandyLuke wrote:

    I retired and rolled my 401K into IRAs at Fidelity,put all of it into a managed account

    with a fee of 1% a year, so about $3500 a year. Its a lot of money but they already have impressed me.All the trades are included in that price. It was really hard for me to let go because I invested myself for 20 years.

  • Report this Comment On April 02, 2014, at 5:59 PM, bojangles wrote:

    I've recently been recommended to utilize Vanguard's services...does anybody have any feedback or experiences with this institution?

  • Report this Comment On May 22, 2014, at 12:52 PM, Ensomaman wrote:

    I opened a 401K (I) and found out after I cannot purchase stocks into it. (Only their mutual funds) SI I am shopping around now too

  • Report this Comment On August 19, 2014, at 11:23 AM, AKiel wrote:

    I'm new to the "family", and I've chosen ETrade to work with. I'm finding them very user friendly, filled with all types of buys and sells, puts, options, etc...

    They stream r/t - which is essential to me starting out, and there is always immediate help just a phone call away. Nothing buy good experiences here, and I'm all in with them.

  • Report this Comment On September 11, 2014, at 12:41 AM, mslynmack wrote:

    Through a company's 401k plan, experience with Vanguard was very good.. Excellent customer service.

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