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How do I choose a Brokerage Firm?

Home » Investing » Selecting a Brokerage Firm » How do I choose a Brokerage Firm?

Choosing a Brokerage Firm does not have to be difficult. They must be licensed or registered with Federal or state securities agencies.

• Research your Brokerage Firm. Certain important information about Brokerage Firms is public.

• Check to see if the Brokerage Firm is properly licensed and registered in your state.

• Check and see if the broker or their firm has had run-ins with regulators or other investors.

How? The Central Registration Depository, (CRD), is a computerized database about brokers or firms. Your state securities regulator may provide information, especially when it comes to investor complaints, so you may want to check with them first. North American Securities Administors Association (NASD) can also provide information. Either your state securities regulator or NASD can provide information from the CRD.

Any broker you use should be covered by SIPC, the Securities Investor Protection Corporation, which protects your assets in a brokerage account up to $500,000 in case the firm should fail. It doesn’t cover trading losses.

After checking the credibility of the Brokerage Firm, ask yourself the following questions:

• Have they provided understandable written information?

• Have they fully explained the investment?

• Are their claims realistic?

• Does the investment meet my personal investment goals?

It pays to remember that if an investment opportunity sounds too good to be true, it usually is. Brokerage ratings/rankings are useful, but they are not completely adequate for your decision about selecting a broker. Be cautious. Do your research.

Next Page: What are the steps to invest with a Brokerage Firm?

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