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Signs of a Good Broker

A good broker will take time to get to know you. You will be asked about your financial history and your current financial situation, your risk tolerance and your financial goals. You can also expect to be asked about your tax status.

A broker asks these questions in order to recommend appropriate investments for you. Beware of any broker who recommends investments before getting a clear picture of your financial personality.
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How to Choose an Online Broker

Consider the following before you sign up with an online broker:

1. What mutual funds does the broker offer?
2. Is there an office close to you?
3. Are there a minimum number of trades required per year?
4. Is there a minimum initial investment required?
5. Is the user interface quick and easy to understand?
6. What educational tools are offered?
7. Can you get advice for an extra fee?
8. Is there a discount for frequent trading?
9. Is the customer service department easy to work with?
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Full-Service Brokers

If you want more personalized service than a discount broker can offer, look into a full-service broker. Full-service brokers offer investment advice, research help and more. They also come with a higher price tag than the no-frills discount brokers.

Interview several full-service brokers before you decide on one. Ask questions about the broker's education and past experience. Ask if the broker gets paid more for selling the firm's products and find out how the broker generally interacts with customers.
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Telemarketing Brokers

Occasionally you may receive a phone call or advertisement in the mail from a broker who claims to have found the next big stock and who wants to offer you a piece of the action. Be very skeptical of any broker who cold calls you to try to get you to invest. No matter how urgent the broker insists the investment is, research it thoroughly before you decide to commit your money to it. Never give your bank information over the phone to a broker.
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Spotting a Scam Financial Analyst

Beware of financial analysts who promise big returns on your investments. Anyone who promises a higher-than-average interest rate isn't being honest with you. Take your investment money elsewhere.
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Relying on Financial Analysts

Don't rely on financial analysts to do your stock research for you. Studies show again and again that most financial analysts don't predict stock performance with much more accuracy than a random coin toss. While the research that financial analysts gather can help you decide which stocks to invest in, consider the advice of financial analysts only one part of your stock-picking decisions.
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Do a Background Check on Your Broker

Before you sign up with a broker, do a background check. You can find out about any broker or firm that deals in securities by searching the NASD Web site. Formerly called the National Association of Securities Dealers, NASD is responsible for regulating brokers. By searching the NASD site, you can find information about any past rule violations and unethical practices of any securities firm or broker.
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Discount Brokers

If you don't require much advice or assistance with your investments, look into a discount broker. These online brokers charge very little per trade so more of your money goes toward your actual investment. When comparing discount brokers, check out the services they offer. Many discount brokers offer educational articles and analysis of individual stocks. Some provide consultation for an extra fee. If you plan on doing a lot of trading, look for a discount broker that offers lower rates for frequent traders.
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How to Handle Problems with Your Broker

If the statements you receive from your broker look amiss, contact the broker for clarification. If the answer you receive is unsatisfactory, send a letter to the firm's management. Keep a copy of the letter for yourself.

If these measures don't work, contact the NASD to file a complaint.
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