Fri Mar 16, 2018 10:55pm EST
Finance Attitude - 5 Key Factors to Consider When Choosing an Online Broker
Finance Attitude - 5 Key Factors to Consider When Choosing an Online Broker

/Lydia Wanjiru/ -- An online broker is quite essential for every investor. It is imperative to carry out a research to determine who an ideal online broker is. Here are a few factors to consider before you choose an online broker:

1.    Minimum initial investment
Most brokerages set a minimum initial investment or money that has to be deposited into the account to start trading. You can pick the best brokerage in the industry but fail to meet their minimum investment requirement. It is therefore vital for an investor to find out whether the amount of capital they have is sufficient to trade with a particular broker.

2.    Trading fees
Trading fees is another important aspect to consider before you select an online broker. Good news is that the competition in the online brokerage has significantly caused the fees to drop. Trading fees vary from one broker to another. Some brokerages also charge hidden fees such as dormant account fees or transfer fees and so it’s important to confirm with the brokerage firm before you proceed.

3.    Services that they offer
Another crucial factor is to find out the services you can get from a specific broker. Do they offer banking services? Do they offer investment advice? Are these services free of charge or do they attract additional charges? These are some of the questions you need to answer before you settle for any brokerage firm. Some brokerage firms like Fidelity and TD Ameritrade offer banking services in addition to their brokerage services. You can also get cash management services and their fees are sometimes lower than with a traditional bank. Find out whether they offer investment advisory services. Find a broker that can offer exhaustive opinion or advice on investment planning. Asset allocation is a crucial aspect of every investor. Find out if you will receive asset allocation advice and if there will be any additional fees charged to cater for it. You also need to know if the broker will offer direct investment advice and whether this will attract any extra charges.

4.    Investment basket
Different brokerages offer different investment options. Majority of brokerages can trade stocks, bonds, ETFs and mutual funds. Some do not trade options, futures and forwards, Currency exchanges, cryptocurrencies, derivatives among others. It is also important to check whether they offer services on retirement planning if that is your main objective or investment goal. You can target brokers that offer special retirement tools such as the retirement calculators.

5.    Reputation
To find out a firm’s reputation, you can check the online reviews about the broker. Customers give first-hand experiences and feedback with the platform online and the reviews may be the best indication of whether the online broker keeps its word. Check and read any complaints written particularly those related to hidden fees or the customer services offered by the platform.  Brokers should give their customers all the details regarding their fees with no hidden charges and their customer support should be easily accessible. Isolated cases may arise from unsatisfied customers but a pattern of complaints should be a red flag.

Bottom line
The key element in choosing a broker is to find out if the broker offers the services and features you need most and if you have to pay for extra services or features that you don’t need. I hope this guide will help you to make an informed decision.