Asking the Right Questions before Deciding on a Brokerage

Online brokerage services are competitive and eager for your
business. They offer an ever-increasing and innovative range
of services to entice you to open an account with them.

Accordingly, use the following checklist to determine which
services interest you, and remember to ask who offers them:

n Do quoted commission costs vary? Does the advertised
low commission vary with the size of the trade? Is there
a minimum charge for small trades? A surcharge for a
maximum number of shares?

n Are there other transaction costs? Does any “handling”
or “service fee” or other transaction charge apply in addition
to the commission?

n Are minimum deposits and balances required? What
is the minimum required initial deposit? Am I required
to maintain a minimum balance in the account?

n What types of orders are accepted? Does the online
brokerage accept the types of orders you may want to
make? What is the policy for cancelled orders?

n How quickly are orders filled? Does the brokerage have
the ability to quickly execute orders so that you can take
advantage of changes in the market throughout the day?

n How quickly are orders confirmed? Does the online
brokerage service give you immediate confirmation that
an order has been executed?

n What emergency communications are available? Can
you reach the broker by fax or by telephone in case you
can’t get online or get to a computer?

n What portfolio information do you receive? How
often is your account information updated? Will you
receive an income tax summary? A transaction summary?

n Does the firm pay interest on idle funds? If you maintain
a substantial cash balance in the account, does the
brokerage firm pay interest on “idle” funds? Some brokerage
accounts automatically “sweep” idle funds to a
higher-interest-bearing account.

n What research resources are available? Does your brokerage
make reports and research available to you? If so,
is this service subject to an additional charge?

n What checking and wiring services are available? Do
you receive free checking services? Can you wire funds
to and from the account free of charge?

n How is the brokerage firm rated by the experts? How
do the services of the brokerage firm measure up using
the online rating services I discuss later in this chapter?

n Do you get price quote information? Some online brokerage
services.