Depending on your needs and level of knowledge in the stock market and investing, you can basically choose from two types of stockbroker: Full Service Brokers: Typically associated with the large brokerage companies who offer a full range of services, these brokers are usually titles Account Executives, Financial Consultants or Financial Advisers.
A fully registered broker will have qualified to advise you as well as buy and sell securities for you by passing the Series 7 securities exam and sometimes the Series 3 commodities exam.
Their remuneration is based on commissions and fees and is mainly connected to what services you use from execution of securities, CDs, annuity and mutual fund trades, managed accounts, financial plans and the like.
They may also be paid on premium services like checking and credit card accounts.
In addition, they will give you access to their firms in-house research on stocks and bonds which can be useful but should be handled with caution.
The full service firms also handle investment banking relationships with the companies they do research for so such research could be suspect.
Just pay attention and ask a lot of questions to allay your suspicions.
In every industry there are bad apples and unfortunately, that is true also with the investment industry.
Some unscrupulous brokers will encourage a large number of trade executions simply in order to boost their commissions without regard to customer benefit.
This practice is called "churning".
One way to protect yourself from churning is to never give a broker the authority to trade on your behalf without taking your permission by withholding "discretionary trading authority" as the industry terms it.
Having said this, I can say from personal experience in the industry that the vast majority of brokers have high ethical standards and do not resort to dubious practices like churning, specially in the bigger companies which have very strict watchdog policies in place.
These types of brokers can become very expensive for their firms legally so they do not last long in reputable companies.
Discount Brokers: If all you need from brokers is trade execution and you are comfortable with making your own buys and sells, you will probably do better to go to one of the many good discount brokers as they can save you a lot of money.
They typically do not offer premium services like in-house research and branded credit cards.
Of course, you will not get the same level of personal service that a full service broker can give you and you need to be alert to any changes in the stocks and bonds you own at all times.
They also have very few physical offices as they have embraced the Internet very aggressively, so you will probably not be able to sit face-to-face with a broker unless you are in one of the major metros.
Even though discount brokers can lower your costs, you should look out for incidental charges that can easily add up as they will charge you for everything on an item basis if they can.
In the end, you will need to weigh your knowledge and comfort levels against the savings.
Even if you are highly knowledgeable, you may not want to spend the time researching the securities in your portfolio all the time and you simply may not be inclined to enter buy and sell orders yourself on the Internet.
On the other hand, if you are OK with your level of knowledge and like to enter your own buy and sell orders, you probably do not need the extras from a full service broker enough to justify the much higher execution costs.
A fully registered broker will have qualified to advise you as well as buy and sell securities for you by passing the Series 7 securities exam and sometimes the Series 3 commodities exam.
Their remuneration is based on commissions and fees and is mainly connected to what services you use from execution of securities, CDs, annuity and mutual fund trades, managed accounts, financial plans and the like.
They may also be paid on premium services like checking and credit card accounts.
In addition, they will give you access to their firms in-house research on stocks and bonds which can be useful but should be handled with caution.
The full service firms also handle investment banking relationships with the companies they do research for so such research could be suspect.
Just pay attention and ask a lot of questions to allay your suspicions.
In every industry there are bad apples and unfortunately, that is true also with the investment industry.
Some unscrupulous brokers will encourage a large number of trade executions simply in order to boost their commissions without regard to customer benefit.
This practice is called "churning".
One way to protect yourself from churning is to never give a broker the authority to trade on your behalf without taking your permission by withholding "discretionary trading authority" as the industry terms it.
Having said this, I can say from personal experience in the industry that the vast majority of brokers have high ethical standards and do not resort to dubious practices like churning, specially in the bigger companies which have very strict watchdog policies in place.
These types of brokers can become very expensive for their firms legally so they do not last long in reputable companies.
Discount Brokers: If all you need from brokers is trade execution and you are comfortable with making your own buys and sells, you will probably do better to go to one of the many good discount brokers as they can save you a lot of money.
They typically do not offer premium services like in-house research and branded credit cards.
Of course, you will not get the same level of personal service that a full service broker can give you and you need to be alert to any changes in the stocks and bonds you own at all times.
They also have very few physical offices as they have embraced the Internet very aggressively, so you will probably not be able to sit face-to-face with a broker unless you are in one of the major metros.
Even though discount brokers can lower your costs, you should look out for incidental charges that can easily add up as they will charge you for everything on an item basis if they can.
In the end, you will need to weigh your knowledge and comfort levels against the savings.
Even if you are highly knowledgeable, you may not want to spend the time researching the securities in your portfolio all the time and you simply may not be inclined to enter buy and sell orders yourself on the Internet.
On the other hand, if you are OK with your level of knowledge and like to enter your own buy and sell orders, you probably do not need the extras from a full service broker enough to justify the much higher execution costs.
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