The Internet has made it possible to trade stocks and securities online, but that doesn't mean you don't need a good investment firm in your corner. A good investment firm can provide research and advice when you need it. Even if you make your own investment decisions, in most cases you need a broker to execute those transactions. Choosing the right investment firm makes your investing life much easier.
When you think of an investment firm, "stockbroker" might be the first word that comes to mind, but all kinds of financial professionals can fit the description of an investment firm, according to the Financial Industry Regulatory Authority, or FINRA. Other types of investment firms might include financial planners, insurance agencies, investment advisers, lawyers and accountants. Depending on the types of investments you're interested in making, you might need the services of more than one type of investment firm.
Level of Service
Investment firms are commonly defined by the level of service they provide. Full service firms typically assign a specific representative to your account. This person is available to answer your questions, make recommendations and execute your investment orders. Discount investment firms might give you access to their research and advice, and they will execute your orders, but you won't get a personal representative. Online investment firms typically cut out the human factor. You usually have access to their investment tools and research, but you'll make all of your investment decisions on your own.
As you probably expect, a full service investment firm is usually the most expensive way to go. Discount investment firms offer discounted commissions, while online investment firms usually provide the lowest cost per transaction. If cost is your primary decision-making factor, your best bet is to shop among online firms to find the one that offers the best combination of price and services. If you're not comfortable making your own investment decisions, a full-service firm might be a better choice.
Before you open a new account with any investment firm, do your homework. Check the firm's background with FINRA, your state's securities regulator agency or the Securities and Exchange Commission's Central Registration Depository, an online database that includes such information as past complaints and regulatory actions taken against investment firms and the people who work for them. Ask questions that apply to your financial needs and goals, and make sure the firm is capable of meeting those needs. Ask how the firm gets paid and who does the paying. A good investment firm can meet your needs at a price you can afford to pay.
- U.S. Securities and Exchange Commission: How to Pick a Financial Professional
- Washington State Department of Financial Institutions: Choosing an Investment Professional, Stockbroker, Registered Representative, Account Executive
- Financial Industry Regulatory Authority: Selecting Investment Professionals
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.