BannRonn's Stock Trading & Investment


How To Choose a Full Service Stock Broker

Full service stock broker trading floorInvestors and traders participate in the stock market and other financial markets for the primary goal of making money. Good full-service brokers, like Goldman Sachs, Morgan Stanley and Merrill Lynch, understand this motivation very well and seek to build long term relationships with their clients so as to mutually profit from the markets.

Savvy clients of full-service brokers are also very performance oriented. That is why full service brokers and all other brokers in general, are fully aware that if they do not create value for their customers, they will soon receive the axe from both their clients and employer. Ideally, a full service broker uses your money and grows your account and profits to make you richer. Clients pay good money for a service they have neither the time nor the attention span to perform for themselves. Keep the following in mind when conducting your full service broker comparison.

Caveat Emptor!

It is well known that full service brokers earn their living from client's commissions, with some charging as much as $75 for a single transaction. Compare this to about $10 for a trade at an online discount broker like TD Ameritrade. The greater the number of transactions these brokers execute for their clients, the more they earn on each account. You can imagine how brokers can be tempted to engage in "churning" of a client's account. Account churning normally applies to trades made with the primary intent of generating commissions for the broker.

Pushing Stock Investment Recommendations

The bursting of the dot-com bubble and the ensuing bear market brought to light many abuses by stock brokers and financial professionals who acted in contrary to the best interests of their clients. Recent hefty fines paid by the major financial institutions shows at least a seriousness on the part of the regulators like the Securities and Exchange Commission (SEC) and other relevant authorities in cleaning up this problem caused by certain uncrupulous individuals. As an investor, it would be "street-smart" to be aware of the possibilities for abuse of the system and to make a quick exit if something smells fishy.

Peg to Performance

Investors have to keep track of their stock investment performance metrics to ensure that they are paying for top-notch financial advice and performance. If the performance of your full service broker does not measure up, you may be better off just buying mutual funds or investing your money on your own. You pay full service rates so that these elite brokers will keep an eagle eye over your money and portfolio, while you are taking care of the other more important things in your life.

Pay your Broker Well

Robert Kiyosaki, the hugely popular author or "Rich Dad Poor Dad" put this point very succinctly. He wrote:

"My rich dad taught me to take the opposite tack. He believed in paying professionals well, and I have adopted that policy also. Today, I have expensive attorneys, accountants, real estate brokers and stockbrokers. Why? Because if, and I do mean if, the people are professionals, their services should make you money. And the more money they make, the more money I make."

May your relationship with your broker be extremely profitable!

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