Choosing a broker isn't all that different from choosing a stock – it requires a lot of careful contemplation, and not all brokers are right for all investors. One of the best and practical ways to choose a broker is to get referrals. The broker's background matters. What are others saying about the brokerage! Just as you should do your research before buying a stock, you should find out as much as possible about your broker.
You can reach out with the existing clients about the broker they associated with and why they have selected the broker, before you make the decision of whether to go with a broker or broker-reseller, it's also worth investigating whether your broker whom you heard / selected is upright in the following parameters.
New age broking – Technology
Technology is the key link in the evolving of brokerage business, helping firms move towards intelligent ideation, delivery and execution, while empowering investors from thought to trade. Brokerages are implementing tech-tools across the trade life-cycle, keeping in mind the user-market integration, convenience of delivery, security, latency, risk controls, client servicing and business continuity. Trading platforms are now feature-rich and customizable, with analytic tools advising asset allocation, portfolio composition and ‘What-If’ scenario. Trade execution platforms: Multiple delivery options across offline, online, desktop and mobile. Trade processing: A key achievement of technology has been lower latency, allowing faster completion of trades, lower impact cost and thus, enhancing returns.
Profile based investment products
Assess the broker capability in profile based investment services; it is important aspect of personal investments. Broker should have tools, products and process to have proper client profiling and advise should be based on the outcome of the profile. Advice based product recommendation and continuous review mechanism and tools should be there with a broker. When choosing a brokerage, most people are probably thinking primarily about buying stocks. Remember there are also many investment alternatives that aren't necessarily offered by every company. This includes equities, derivatives, commodities, mutual funds, PMS, bonds, fixed deposit and other structured products, etc.
Your investor profile is based on several factors, including your investment horizon, risk tolerance, objective traits, Subjective attitudes, Balance between risk and return. Once your profile has been determined, you'll know the required asset mix for achieving your objectives within your chosen timeframe.
Research - Analytics – Knowledge First
Analytical tools for clients across portfolio planning, self-directed asset allocation and idea generation. Some of the tools include ‘what-if’ investment scenarios and quantitative equities rating models. Some broking houses publish excellent research reports exclusively for its members. Ask your prospective broker to give records of earlier research reports and see if the opinions expressed in those reports have some degree of accuracy. Value stock, growth stocks, quality stocks, defensive or cyclical stocks.
Stock selection is one of the key aspects, a broker who understands and has process such as selection of stocks based on quality of the management, growth aspect, longevity and sustainability and at right price. Subscription view on researched IPO which enables many investors to enter markets.
Wealth Creation – Art
Wealth creation study is an art of long term investment! Not many brokers provide /publish in depth detail research ideas for long term investments. A disciplined and systematic approach to investing while being patient for returns is the true mantra to wealth creation over a period of time. Stockbrokers are service providers. They are not only in the business of buy and sell stocks but then to create returns of the investments Money making is just incidental but select a broker who believes in Wealth creation with proven track record who can create wealth on your investment.
Brokerage – Returns
Most of retail investor selects a broker who offers to charge fewer commissions on trade. But, that’s not the criteria by which you select a broker. A broker should understand your risk profile and they should be capable of advising you with best information. Return on your investment is more important than the insignificant brokerage charges. Price isn't everything. Remember the saying "you get what you pay for"? As with anything you buy, the price may be indicative of the quality. Don't open an account with a broker simply because it offers the lowest commission cost.
Discount is not always a good deal. Consider starting out with a full-service broker. They are often best for novice investors who may still need to build confidence and knowledge of the markets. As you become a more sophisticated investor, you can graduate into investing yourself.
Reach -Customer First Attitude
Be sure to get opinion from investors about the quality of service that the broker provides. Select a broker who has robust customer support tools and mechanism. You can probe to understand the TAT in customer resolution / quires.
Eventually, there comes a time when you've got to make that decision and choose a broker. It's absolutely necessary to balance your needs as an investor and as a client – good customer service is essential, too. While your first broker won't necessarily be your broker for life, you have a much better chance of making money as an investor if you put the right amount of time and research into choosing a broker.