How to choose a stock broker?

The first big choice you need to make is deciding which kind of broker you are going to deal with: full-service or discount. If you believe that you are going to need a lot of advice, a full-service broker will probably better serve you. If you are making your own decisions about stocks, by all means use a discount broker. Discount brokers charge much lower commissions than do full-service brokers.

Many discount brokers have both electronic and “bricks and mortar” systems of operation. If you discount broker is on the Web, you can enter your order electronically and receive confirmation the same way. Some discount brokers have branch offices where you can sit down with a broker and discuss your investment objectives and goals.
Either way, you can obtain commission costs and product information by visiting a discount broker’s Web site, by calling their phone number (usually toll-free), or by stopping by the branch office.

In addition to discount commissions, most discount brokers also offer other products and services, such as mutual funds, IRAs, research reports, bonds, and others. Full-service brokers are paid by the commissions they earn on buying and selling stocks and other products for clients. This arrangement can lead to a tendency on their part to recommend frequent trading of stocks rather than pursuing a “buy and hold” strategy. This advice can put their interests in conflict with yours. So if you use a full-service broker, avoid miscommunication by making sure that she or he knows that you are not interested in frequent trading but in buying good stocks and holding them for the long term. You may be better off if you find a good financial advisor to guide you on stock purchases and perhaps on other aspects of your financial program. These advisors often work for a flat fee on an hourly basis.

If you decide to work with a full-service broker, you have to choose a broker one way or another. How do you make this choice? You probably select a broker pretty much the same way you select a doctor, a lawyer, or other professional. You ask people for recommendations. You look in the phone book. You see ads in the paper or on TV. After you acquire a list of potential brokers, take the process at least one step further. After you get several names, make some calls. Call their offices and ask about account minimums and commission costs. Find out how convenient their services may be. If you’re put on hold for longer than a few minutes or the broker asks to call you back but never does, he or she may not be the broker for you.
Narrow your choices down to two or three brokers and then interview each of them.
Sooner or later, you will get on a mailing list that is sold to brokers. Then you start getting unsolicited calls. All brokers have a good line and can be very persuasive. My recommendation:
Find a financial planner in your area and deal with her or him face to face. A good financial planner whom you trust can be a very helpful to you as you work to achieve your financial goals.