Finding a Good Online Broker

Online investment broker advertisements all seem the same. Between discount commissions, ease of trading and online tools, it’s easy for the average investor to become dizzy reviewing all the available choices. Choosing the right discount broker requires investors to make a series of decisions based more on their end goals than on any definitive list of features.

Write Out What You Want From a Broker

What are you trying to accomplish? Are you investing a large sum of cash into a single account or have a few smaller accounts that need a home? Do you often need help with forms and tools or work well alone? How often will you make transactions into our out of the account? Is research from the site important or do you prefer third party data found elsewhere? Answer each of these questions on a clean sheet of paper to begin finding the right home for your money.

Range of Investment Options

If you’re only interested in domestic stock trading, the vast majority of equities will be available to every brokerage service. Firms operate a separate platform for mutual funds, exchange traded funds, bonds, precious metals, real estate investment trusts, annuities and certificates of deposit. It’s not fun to be surprised when the broker can’t deliver expected services. Ask each online broker for a list of available investments.

Availability

Although you never want to make panicked trades, there may come a time when investments need to be moved quickly. If your broker’s site is down for maintenance or functions slowly, trades could slip away.

Visit your prospective broker’s site at different times over several days and click around. Watch how fast the site loads. Activity is highest in the first and last hour of normal trading days, so focus on those hours. If the site doesn’t respond quickly or is frequently down, you’ll want to look elsewhere for an online broker.

Sometimes you have questions that aren’t answered on the website. In this case, you’ll be forced to call the broker’s help line and ask questions. How prominently displayed is the help line phone number? Call the number listed and visit several menus. If the broker has a convoluted phone menu system, this may not be the service for you. Call the company’s help desk and dream up a question. If the help desk operator is less than helpful, move on to the next broker.

Flexibility

Online brokerage firms are fantastic while you’re seated in front of a computer monitor, but what happens when you’re on vacation? If you plan to be away from the computer screen at all, explore each of the methods a service offers to place trades. Many firms now offer smart phone applications, fax trading, and telephone trades with a live representative. These trades may be at an additional cost, so inquire about these fees.

Investing Tools

Some brokers brag about low fees because they offer stripped-down services and tools. If you want one-stop shopping for research and portfolio construction, review the broker’s toolset. Look for third party research offered through the site that originates from several reputable firms. Play with the site’s financial planning tools. Investigate whether how easy it is to find news and fundamental statistics on company stocks. Evaluate filters, fund analyzers and trading tools to find the one that best suits your needs.

Banking Services

You’ll need a firm offering robust banking services if there will be frequent transactions in and out of the account. Some brokers offer ATM and credit cards that link to the account, while others forgo these features. Some offer check writing, but may have stipulations on the number or amount of checking transactions. These services aren’t always free. If a firm offers attractive banking benefits find out how much money you’ll have to pay to enjoy these services.

Think twice before exploring the use of your brokerage account as a primary banking account. Many have draconian means to fund your account and don’t process deposits until your check clears. Explore direct deposit and instant access to funds, and ask about banking features that don’t limit the number or size of transactions. Review the company’s web support. You’ll want to be able to check your balance on the fly and balance the checkbook without a hassle.

Trading commissions

Lower cost doesn’t mean a better brokerage service, but fees still matter. After you’ve researched everything else, compare each brokerage’s schedule of charges. If two brokers seem similar on other important features, choose the one with lower fees. However, beware the low cost provider that doesn’t have features that you’ll need later. You’ll find yourself saving a few pennies and screaming at your computer screen.

New investors are often better served by an online brokerage service linked to a full-service operator. Because new investors often have many questions, the hand-holding these firms are designed to provide can be invaluable when you first begin. Remember that you’re paying for service. The moment you learn how the ropes work, investigate moving your account to a company with lower costs.

Online brokerage accounts spend lots of money advertising lower prices, but for many investors price is the last feature they should explore. By starting with a list of goals and working through the features each broker offers, a wise investor will find something better than the best online broker. They’ll discover the best online broker for their particular goals.