How to Choose the Right Brokerage Firm for You

If you want to invest money, you need to open a brokerage account. But with so many different brokers out there -- from robo-advisors to investing platforms with in-depth research for hands-on investors -- how do you pick the right one?

While there's no shortage of broker options out there, picking the right broker isn't as tricky as it looks. Truthfully, it all comes down to knowing your investment goals, how involved you want to be in your investments, and how much you're willing to pay (if anything at all) for your brokerage account.

To ensure you make the right decision and end up happy with your broker over the long run, let's take a look at how you can choose the best brokerage firm for you.

1. Decide what kind of account you want to open

Before you get your hands dirty sifting through the best brokerage firms, it's best to step back and ask yourself: What kind of account am I looking to open?

It's not a trick question. Often, you know in your head the type of account you're looking for, even if you're not sure what the name is. For instance, if you plan to use this account for retirement savings, then you're likely looking for a tax-advantaged account like an IRA. On the other hand, if you want to grow money for near-term purposes, then you're likely looking for a standard taxable brokerage account.

Here are some of the most popular accounts you can open at brokerage firms:

• Standard taxable brokerage account: This is the most common account type you can open at a brokerage firm. You can buy and sell securities -- such as stocks, bonds, ETFs, and mutual funds -- and withdraw money without penalties. You'll pay taxes on capital gains (or offset gains with capital losses), and you can open a cash account, which lets you deposit your own money, or a margin account, which lets you borrow money from your broker.
• Roth IRA: This retirement account allows you to contribute after-tax dollars (money you've paid taxes on) and grow investments on a tax-deferred basis. Your withdrawals are also 100% tax free, and you can withdraw contributions (but not earnings) at any time without penalty.
• Traditional IRA: Like a Roth IRA, traditional IRAs let you grow investments without paying capital gains taxes. However, you'll fund a traditional IRA with pre-tax dollars (money you haven't paid taxes on) and pay taxes when you make withdrawals in retirement. Your contributions in a traditional IRA are also tax deductible.
• Solo 401(k): A solo 401(k) is a retirement account available to self-employed people. Money invested in a solo 401(k) will grow tax free, and you'll have higher contribution limits than with an IRA.

Not all brokerage firms offer all types of accounts, so consider what your plans are to make sure you find a broker that will accommodate your financial needs.

2. Determine your investing priorities

Different brokerage firms have different strengths, and your investing priorities will help you determine which strengths are better for you.

Some brokers, for instance, are better for people who want to trade now but don't have much money to start with, while others cater to investors with a higher net worth. Some brokers focus on full-featured desktop trading platforms for experienced traders, while others are designed for mobile users who want quick and simple trades. Some are no-frills and charge low or no fees, while others may cost more but have advanced tools or provide better customer support.

There's also a big difference in the types of assets different brokerage firms focus on. For example, some have a huge selection of inexpensive exchange-traded funds (ETFs) and no-load mutual funds, while others focus on cryptocurrency trading -- which many mainstream brokers still don't offer. You'll want to think about what types of assets you're hoping to trade and look for a brokerage firm that will allow access to all of them.

Think about the type of experience you want to have and what's most important to you. When you approach brokerage firms with your priorities firmly in mind, it's easier to find a good match.

3. Evaluate the broker tools and support you'll need

Since different brokerage firms cater to investors of different levels and priorities, their platforms and accounts will likewise be designed with specific investors in mind.

For instance, if you're a beginner investor, then you may have different needs when it comes to customer education and trading support. You may want access to webinars and educational articles that teach the basics of investing, or you may be interested in screeners that make it really easy to pick out different assets to buy.

Likewise, if you're an advanced investor then you're likely more interested in charting features, expert analysis, and in-depth company research.

Think about where you're starting out -- and how much time you plan to spend devoting yourself to researching investments -- so you can find a brokerage that offers the tools and materials you're looking for.

4. Compare costs and convenience

Many of the best brokerage firms today offer commission-free trades on stocks and ETFs. However, it's still important to look at all of the broker's fees first, as it may charge fees for other services, such as transferring money from one brokerage account to another or closing your account altogether.

While looking at costs, convenience is another factor to consider. For example, if you'd rather sit down and talk to an expert face to face, check to see if the brokerage firm has a network of brick-and-mortar offices -- and, if so, make sure there's one near you. Banks may also offer brokerage accounts to their clients, which could be convenient if you'd like to have your investments in the same place as your savings. In some cases, it might be worthwhile to pay for a full-service broker if it means getting the service you want.

5. Explore trading platforms at different brokerage firms

Finally, you want to make sure you are comfortable navigating the brokerage firm's trading platform to buy and sell assets.

Most brokers will let you download their investment app or try out their desktop software without transferring money into the account. Consider spending some time playing with the platforms each broker you're interested in offers before you make your final choice.

Compare brokerage firms before deciding

Before making a final decision, you may need to look around, evaluate the pros and cons of different firms, and compare your favorites. It's okay to spend some time on this, especially since some brokers charge a fee when you cancel an account.

By following these five steps, you should end up with a brokerage firm that makes investing easy and gives you access to the type of account and assets you're looking for.