Questions to Ask Your Investment Broker

Ideally, you want to find an investment broker who has seen both highs and lows in the market. Ask your potential broker how long he has been working specifically as an adviser. Brand new advisers are often full of enthusiasm, but without firsthand experience in how market cycles work, a rookie broker may not be as good at anticipating future market moves. This isn't to say that the oldest broker you can find is necessarily a match for you, but you should at least ask if an adviser has been through a few market cycles. Ask if he's had any negative experiences in the industry, such as being reprimanded or disciplined by any regulatory agencies.

Most financial services firms require brokers to have at least a college degree. Ask a broker if he has any industry-specific education above and beyond a bachelor's degree. Look for advisers who possess industry certifications, such as the Certified Financial Planner (CFP) designation. These types of brokers have advanced education in both investment-related coursework and ethics instruction, and show a commitment to their industry. Ask your broker why he doesn't have any of these certifications if he doesn't.

Ask your broker how he gets paid for his work. Advisers who are paid a commission on products they sell have an incentive to sell you as much as possible. Fee-based brokers remove this conflict of interest by charging a simple fee on client assets. However, a fee-based broker receives his annual payout regardless of how many trades you make, which could make him less likely to monitor your account closely. Ask your broker if he has any special agreements or payment plans with outside companies, such as specific mutual funds or insurance companies, as these could also lead to conflicts of interest.

Find out what your broker's investment philosophy is, not just in terms of how he likes to invest, but also how he manages his clients. For example, ask if he will be contacting you once a month or once a year. Ask if he sets up annual review meetings, or if he'll wait for you to call with questions. Inquire as to whether you'll deal mainly with his assistant or with him directly. Regarding investments, ask how often he anticipates making portfolio changes. Also ask if he's open to new ideas that you suggest.