He was only in his late 20s, but when Jordan Silver decided to open a brokerage account, he had retirement in mind.
Nearly two decades ago, Silver met with a broker, talked through his goals, his current financial information, and his objectives, and together they decided to set up an Individual Retirement Account. As life went on and Silver's family grew -- and his financial goals changed -- the broker helped him adjust his investment strategy as needed, including setting up 529 college savings accounts for his children.
Silver, now 45, continues to work with that broker, who he says set him "on a great path (with) a light at the end of the financial tunnel."
For those who desire a broker's assistance in making investing decisions, finding the right broker is an important -- and, perhaps for some, a daunting -- undertaking. But there are a few basic steps you can take to ease that process.
When you're going to meet with a broker, or thinking about opening an account online, here are five tips to help you prepare.
Have your paperwork in order
At the very least, you'll want to have your Social Security number (or tax identification number) and a photo ID handy. Brokerage firms need the former to report your investment income to the Internal Revenue Service, and they need both pieces to verify your identity under federal law designed to prevent money laundering and terrorist financing.
Additionally, you'll want to have other key information, such as your annual income, net worth, and other financial information handy. Regulators require brokers to ask for this information to help them make suitable investment recommendations.
Have your questions ready
Before investing with a broker, you should also make sure you ask them enough questions to ensure that you feel confident that they understand your needs and that you are comfortable with their experience and offerings.
You can start by asking about his or her experience in working with people like you, and their areas of expertise. You can inquire into how long they have been working with their current firm, and their past work experience. (Current and past work experience is also available through FINRA's BrokerCheck.)
You'll also want to get an idea of the kind of products and services he or she typically recommends to clients, as well as the products they don't recommend, remembering to ask why. And it's a good idea to get a firm understanding of just how he or she gets paid.
Check if your broker is registered
Before you hire a broker, be sure to check FINRA's BrokerCheck.
You can find out, among other things, whether your broker is licensed in your state to conduct business or whether he or she has been sanctioned by securities regulators. If he or she has a complaint on file, be sure to read "Your Broker Has a Customer Complaint, Now What?" for more information on how to look at that information.
You should also consider consulting your state securities regulator, local consumer and investment groups, or others who have established business relationships with a particular broker.
Decide what to do with your cash
There is a chance that once you've got cash in your account, you might not have all of it invested at all times. This is especially true if you are receiving dividends or interest in the account and haven't yet decided what to do with that income.
Brokerage firms usually place this cash into what's known as a cash management or "cash sweep" program. When you apply to open an account, you may be asked to choose from more than one cash management program, but not all cash management programs are alike. Interest rates and insurance coverage may vary, so it's important to pay attention to such differences when making your selection.
Choose who makes the decisions
By default, the person who owns a brokerage account is empowered to make decisions about that account. However, it's also possible for the account owner to grant "discretionary authority" to someone else, such as a spouse.
In that case, the person who is granted discretionary authority can make investments without consulting the account's owner. A brokerage account owner may also share authority over an account by granting other people authorized trading privileges or may transfer authority through power of attorney.
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