Do you have the right stockbroker?

Fsp Invest Team, 20 May. 2013

Tags: stockbrokers, execution-only stockbrokers, advisory stockbrokers, discretionary stockbrokers, investments, how to pick a stockbroker, investing, types of services offered by stockbrokers

When buying and selling shares, you need a broker to execute your trades. But, before you make any investments, it’s wise to talk to a few brokers to find out exactly what range of services they offer and what their fees are. Ultimately, your choice of broking service will depend on the amount of help and advice you need for your investments. Here are the three types of services you can choose from…

When it comes to your investment needs, its important choose your stockbroker in the same way you choose any professional. So “ask for references and then make up your own mind according to what kind of investor you plan to be,” advises Francois Joubert senior analyst at Red Hot Penny Shares
But, to do this, you need to know what the different types of services offered by stockbrokers offer are. This will help you to choose the one that’s suited to your investments needs.

Three types of stockbroking services you can choose from

1.    Execution-only stockbrokers are only there to execute your buy and sell instructions when you place them. They won’t give you any advice on the shares. This is the cheapest option of the three services.

2.    Advisory stockbrokers will charge you a fee when you need their advice. Either they’ll have details of all your investments and give you advice on them as a whole or they’ll give you ad hoc advice on buying and selling the individual shares you suggest.

3.    Discretionary stockbrokers are the most expensive of the three services. A discretionary stockbroker buys, sells, advises and manages your investments completely. He’ll keep you informed on your investments and tell you what he’s buying and selling.

Remember, “you should choose your stockbroker depending on the amount of guidance and support you feel you need in the markets. For the most part though, an execution-only stockbroker will be fine,” advises Joubert.

So what happens after you’ve chosen a stockbroker?

After you’ve chosen your preferred stockbroker, you’ll be sent a Client Agreement Letter. The letter will outline the types of services you’ll be offered and the stockbrokers’ terms and conditions.

By understanding the different types of services offered by stockbrokers you’ll be able to choose the one that suits your investment needs best.

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