How You Should Evaluate Your Stock Broker And Why I Finally Switched

After sticking with my stock broker for over a year, I decided to finally switch. And in this post I'm going to discuss the reasons why and give you an idea if your current broker is right for you.
I decided to finally switch stock brokers. And in this post I'm going to discuss the reasons why and give you an idea if your current broker is right for you.

There are two types of stock brokers in general: traditional and online.

Traditional brokers are ones you call over the phone to make transactions - so you get to talk to an actual human being. Online brokers are practically websites with information and buttons you can click. There are hotlines you can call as well as email support. But for the most part there's no human element.

Despite the difference though, I view them the same way. After all, they serve the same purpose - let you buy stocks.

Here are factors you can use to evaluate your broker:

Fees - The lower the better.

Despite providing essentially the same service, not all brokers charge the same fees. And in a business where volume is important, a few tenths of a percentage in difference can go a long way.

Carefully look at your broker's website for the disclosure on fees or ask them straight up how much they charge. (Bonus: check this blog for a comparison of online stock broker fees)

If everything else is equal, there's no point in overpaying. The lowest isn't always the best choice though, because of the other factors.

My previous stock broker had one of the lowest fees. My new broker has slightly cheaper fees.


Accessibility/Reliability

In stocks, patience can be an asset and not just a virtue. However, there's a fine line between patience and inaction.

You don't want to be left sitting and waiting when you need to buy or sell. So it's important that your broker be readily available when you need them.

For traditional brokers, this means you can get a hold of them fairly easily, and not be left on call waiting indefinitely. For online brokers, this means the site is up and running practically 99.99% of the time - excluding scheduled maintenance of course.

In a relatively short time-span of 1.5 years, my previous broker was down or malfunctioning for around a dozen days. And in at least a couple of occasions, it actually prevented me from executing a trade I wanted, because their site suddenly went down. It was one of the first reasons that made me think of switching.


Convenience

Investing should be a regular a part of our lives. So it's important that it's convenient enough; It doesn't discourage us in any way and we are not forced to do it later at a more convenient time.

This is one of the factors that differentiate traditional and online brokers. Which one you find more convenient is a personal choice.

For myself, I switched from one online broker to another. I don't like phones:) For OFWs, online brokers could be a good choice also.


Research

Your broker should provide something - ideally more than just chart readings which can be available for free. If they don't, they should have really cheap fees.

When I switched, I got a broker that gave really good insights. I figured, there wasn't much point in switching if all I got was more of the same. As reference, get a broker than can give fundamental and technical analysis (practically everyone) as well as market insights and stock suggestions (harder, but not uncommon).


Customer service

Who doesn't want great customer service, right? It's always important that your broker is able to respond to your needs.


For me, I switched because my new broker has lower fees, better (excellent) research, gives me market updates and insights, a more reliable website, is just as convenient and probably has better customer service.



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2 comments:

  1. I am curious to know the previous stock broker your were using. Care to share? I am on the process of opening another online stock broker account for personal reasons and Im hoping na the same as my current one.

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  2. HI Pinas! I was using BPI Trade. Still have an account, though I'm mainly using COL now.

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