A securities brokerage is the link between you and the financial markets and will purchase and sell stocks, bonds, and other securities on your behalf.
You will then need to pay the securities brokerage firm for the services that it provides. The fees will vary depending on the institution and the type of facilities that you use. There will be certain charges for buying and selling securities on your behalf. But if you need advice as well about the best investment options that are available for you, the securities brokerage will charge an additional sum for this.
The sort of advice depends upon your financial status and your requirements. If you are a retiree with limited investable resources, the securities brokerage will probably recommend that you purchase low-risk investments that provide a regular stream of income such as highly rated government or corporate bonds. While your returns will not be very high with this type of investment, it is likely that your principal will remain secure.
But if you are an experienced investor looking to increase returns, company shares may be a more suitable investment option. Stocks provide the opportunity to make large gains, although they can put your capital at risk as well.
During your initial meeting, the securities brokerage firm will ask you a series of questions in an effort to gain an understanding of your financial needs and goals, and then will create a customer profile. This will allow the firm to provide the services and recommendations that match your requirements.
As a customer, it is in your best interests to deal with a firm that can meet your needs and provide the type of services you are looking for. For example, certain securities brokerages specialise in mutual funds or government bonds. These may not be appropriate for you if you want to trade in stocks.
Your success as an investor can depend to a large extent on selecting the right securities brokerage for you.
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How To Choose The Right Securities Brokerage For You
Identify your requirements. Here are some key points that you could consider:
- How often will you purchase financial securities through the brokerage?
- Do you plan to invest in stocks, bonds, mutual funds, ETFs, or a combination of these?
- Do you plan to trade on a regular basis?
Based on the details above, you can draw up an investment plan. At this stage, it would be useful to list down any additional services that you would look for in a securities brokerage. For example:
- Would you transact online or would you prefer to place your orders on the phone?
- Do you need the brokerage firm to provide you with research reports and recommendations?
With this information in hand, you can now identify several brokerages that meet your needs. For starters, our SmartSearch tool allows you to be connected to the right securities brokerages that you may need. Meanwhile, write down any questions that you may have.
Contact two or three securities brokerages that seem to be a good match. Set up a personal meeting or, if that is not possible, speak with them over the phone to ask any questions that you may have.
This step is very important. Your personal interaction with the firm will give you an idea of what you can expect if you decide to become their client. Keep in mind:
- Are the brokerage’s employees courteous?
- Do they have the knowledge to answer your queries?
It is advisable to seek clarifications before you register with a brokerage. You don’t want any unpleasant surprises later, so choose the securities brokerage that you think is right for you.
At the end of the day, the firm that you engage should help you to increase your returns. It’s important to carry out a periodic review to compare the amounts that you are paying the brokerage with the returns that you are making.
This is especially important if you are dealing with a full-service brokerage that provides you with trading advice. Compare your costs and fees with the gains that you are making. If your investment portfolio is not growing fast enough, it may be better to switch over to another firm.