After you figure out which broker you want to use to place your order, get back in touch with that person. The broker will ask you to fill out an application, called the customer agreement. You can’t avoid filling out this application. No broker can deal with you until you have provided him or her with information about yourself and your financial situation and goals. From the start, the broker will need accurate information to process stock purchases and, regrettably but necessarily, to keep the IRS informed about all the money you make from your investments. The application requires you to provide some common personal information such as your name, address, tax identification number (social security number for most people), current job (if employed), your bank, and an estimate of your net worth.
If you are working with a full-service broker, you need to answer some broad questions about your investment goals and the kinds of stocks you are considering for investment. Some very personal questions about your finances and goals may puzzle you or even turn you off, but brokers require this information for good reasons. A full-service broker is required by regulation to provide stock advice appropriate to the client’s situation. This is often referred to as the “know your customer” rule.
There are two other aspects of the customer agreement that you should be aware of. The first is extensive and detailed information about how you will pay for your purchases and what happens if you are late in paying or don’t pay at all. This part of the application is complex and legalistic. I don’t want to exaggerate the complexity of the agreement in general. It is long and detailed, but your broker should be willing to answer your questions. The securities industry is closely regulated, and you can be quite sure that the customer agreement is not intended to deceive you. It just takes patience to wade through it.
If you can’t figure out what some parts of it mean, be persistent in asking your broker to explain the difficult parts to you. This could be a good test of whether you have picked
the right broker. You will have lots of questions all along the way. Don’t deal with a broker who doesn’t have the time or inclination to work with you.
Make sure that you read and understand the customer agreement before you sign it. Don’t be rushed into signing it. Almost all of the customer service agreements currently in use require that you, the client, sign away your right to sue the broker if you believe you actually have been wronged. You will almost certainly be informed that if you have a dispute or problem, you must take it to arbitration for resolution. Some brokers, especially Internet-based brokers, may require that when you establish your account with them, you also set up an account with sufficient funds in it to cover anticipated purchases. The brokerage then pays you interest on the funds you deposit with them.
If you are working with a full-service broker, you need to answer some broad questions about your investment goals and the kinds of stocks you are considering for investment. Some very personal questions about your finances and goals may puzzle you or even turn you off, but brokers require this information for good reasons. A full-service broker is required by regulation to provide stock advice appropriate to the client’s situation. This is often referred to as the “know your customer” rule.
There are two other aspects of the customer agreement that you should be aware of. The first is extensive and detailed information about how you will pay for your purchases and what happens if you are late in paying or don’t pay at all. This part of the application is complex and legalistic. I don’t want to exaggerate the complexity of the agreement in general. It is long and detailed, but your broker should be willing to answer your questions. The securities industry is closely regulated, and you can be quite sure that the customer agreement is not intended to deceive you. It just takes patience to wade through it.
If you can’t figure out what some parts of it mean, be persistent in asking your broker to explain the difficult parts to you. This could be a good test of whether you have picked
the right broker. You will have lots of questions all along the way. Don’t deal with a broker who doesn’t have the time or inclination to work with you.
Make sure that you read and understand the customer agreement before you sign it. Don’t be rushed into signing it. Almost all of the customer service agreements currently in use require that you, the client, sign away your right to sue the broker if you believe you actually have been wronged. You will almost certainly be informed that if you have a dispute or problem, you must take it to arbitration for resolution. Some brokers, especially Internet-based brokers, may require that when you establish your account with them, you also set up an account with sufficient funds in it to cover anticipated purchases. The brokerage then pays you interest on the funds you deposit with them.
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