Online Brokers - Biggest Factors When Choosing
Yesterday I kicked this mini series off by introducing the big three online brokers. It was a great post that covered alot of intro ground into what you should expect and who should you expect to come out on top. I concluded yesterday saying I would talk on the topic of the different factors people most consider when choosing an online broker. Every factor is important, but most brokers provide a fine line to what they offer.
Here are some of the factors investors most consider when choosing an online broker and my take on what to watch out for:
1. Price per trade (commissions): Your cost per trade is important, yes. I recently just switched myself along with a client into Ameritrade Izone from Ameritrade Apex because my commissions dropped by 50% to $5 per trade. What you need to make sure you look at though is if that per trade fee is a “flat fee” or not. A flat fee trade means that there is no catches, it’s $x per trade and that’s it. Alot of smaller unknown brokers market competitive prices but do with a catch, if not a few. Some of the most common added subfees are 1. if you trade over x shares, 2. if the stock is a penny stock, and 3. the type of order you use. The big three stock brokers are great because you never have to worry about these extra costs; what you see is what you get.
2. Trading Tools: Another pretty easy one to guess because investors want tools such as real time quotes, level II quote screens, and more. What do you need to watch out for? When choosing your broker check to see how much these tools cost, and see what you get for free. Sad to say, but even now there are brokers who do not provide free real time quotes. If you aren’t getting free real time quotes and basic charting software, you are getting the sour end of the deal. Also, most brokers depending will charge for level II quote screens, but some are cheaper than others.
3. Quality of Service: This really includes customer service, the help desk, how easy it is to access and manage your account, etc. Simply put, bigger is better when it comes to choosing your online broker based on quality of service. The more clients they are serving, the better off they are. Smaller unknown brokers can’t provide 24/7 support or the best site features because they just don’t have the resources to do it. When looking for your online broker, remember to not cut yourself short, because you deserve the best that’s out there!
- If you can due your due diligence and scout this information out before making a final decision on the online broker of your choice, you will be a happier camper in the long run. Especially when looking at smaller unknown brokers that most people haven’t heard of, you have to be extra careful. Remember that they are competing for your business, not the other way around; it’s ok to have high expectations.Tomorrow I will continue the series by going into what the latest trends are with online brokers. Why is the industry consolidating? What are we as investors going to want tomorrow that brokers are now providing today? These are things you should know, and may help in ultimately choosing your own broker to trade with.
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