What kind of broker am I looking for?
There are two main categories of brokers: full-service brokers and discount brokers.
A full-service broker provides step-by-step guidance to the customer. He will advice you on the purchase of shares, plan your financials, analyze your investment and provide full customer support. Because of these services full-service brokers charge more than discount brokers.
A discount broker on the other hand shall not advice you on the investment trends or provide you with detailed market research. He will carry out transactions according to your specifications. Discount brokers charge lower fees but you lose out on customer support. The success of the dealings will depend on how well you are informed about the market. Before you settle on a broker it is recommended that you survey different companies for their brokerage and decide which is best for you.
Investors, who are stock savvy and capable of deciding which stocks they want to buy, approach discount brokers. But if they are not well informed about the company in which they wish to invest they will approach a full-service broker.
Where do I look for a broker?
If you have friends dealing in stocks they can recommend you some names. Market survey will also provide names of brokers with good reputation. Broker Referral Service maintained by The Australian Stock Exchange will provide you with the list of brokers. You can search for brokers online and commence trading.
What information should I gather from my discount broker? What are the charges for buying and selling shares? How will the broker be available to me: over the net of telephone? You need to clarify any doubts regarding their subscription fee. Sometimes brokers offer discounts if you are trading quite often with them. It is an incentive they offer as trader discounts. You should always enquire about perks offered to customers. Though you are aware of the nature of their services you should enquire if they provide any company research or market research data.
What information should I gather from my full-service broker?
Know about their charges. As they provide customer support and personal attention their charges will vary according to the nature of services provided. You should survey the market for their research capabilities. The advice you on investment strategies which is largely dependent on their market research skills.
Know how they intimate their clients about the latest investment trends. Many companies have regular updates that they mail their clients. Information is the key here; you must clarify these points before deciding on a broker.
Another important consideration before you open a brokerage account is that of minimum opening balance and maintenance fees. The minimum opening balance required by some companies is quite high. Some brokerage firms also charge a maintenance fee if your balance falls below a specified amount. Know the company policies in detail before finalizing your choice.
Each brokerage type has its advantages and disadvantages therefore you need to be well informed and sure about what kind of brokerage would be ideal for you.