Depending on the end-customer’s needs and level of knowledge in the stock market and investing, you can basically choose from two types of stockbroker business ideas in the new market space today.
Full Service Brokers:
Typically associated with the large brokerage companies who offer a full range of services, these brokers are usually titles Account Executives, Financial Consultants or Financial Advisers. A fully registered broker will have qualified to advise you as well as buy and sell securities for you by passing the Series 7 securities exam and sometimes the Series 3 commodities exam. Their remuneration is based on commissions and fees and is mainly connected to what services you use from execution of securities, CDs, annuity and mutual fund trades, managed accounts, financial plans and the like. They may also be paid on premium services like checking and credit card accounts. In addition, they will give you access to their firms in-house research on stocks and bonds which can be useful but should be handled with caution.
The full service firms such as immediate edge also handle investment banking relationships with the companies they do research for so such research could be suspect. Just pay attention and ask a lot of questions to allay your suspicions. In every industry there are bad apples and unfortunately, that is true also with the investment industry. Some unscrupulous brokers will encourage a large number of trade executions simply in order to boost their commissions without regard to customer benefit. This practice is called “churning”.
One way to protect yourself from churning is to never give a broker the authority to trade on your behalf without taking your permission by withholding “discretionary trading authority” as the industry terms it. Having said this, I can say from personal experience in the industry that the vast majority of brokers have high ethical standards and do not resort to dubious practices like churning, especially in the bigger companies which have very strict watchdog policies in place. These types of brokers can become very expensive for their firms legally so they do not last long in reputable companies.
Discount Brokers:
If all you need from brokers is trade execution and you are comfortable with making your own buys and sells, you will probably do better to go to one of the many good discount brokers as they can save you a lot of money. They typically do not offer premium services like in-house research and branded credit cards. Of course, you will not get the same level of personal service that a full service broker with access to the best bitcoin wallet uk can give you and you need to be alert to any changes in the stocks and bonds you own at all times. They also have very few physical offices as they have embraced the Internet very aggressively, so you will probably not be able to sit face-to-face with a broker unless you are in one of the major metros. Even though discount brokers can lower your costs, you should look out for incidental charges that can easily add up as they will charge you for everything on an item basis if they can.
Final Tips to select the Best Stock Broker Business Idea
In choosing a stockbroker company like CMC Markets, it is better not to be content with any random person a stockbroking firm assigns to you. Personally review his credentials. Choose someone with four to five years of experience and ask for a list of clients that you can contact for references. Check with regulation authorities if there have been complaints against him.
You also want a broker who doesn’t have too many clients particularly if you decide to be an active trader. If your broker is too busy handling 300 other clients, you may often end up talking to a call center representative. There are instances, of course, when your concern can just as adequately be handled by a call center so don’t abruptly close your account just because your broker wasn’t able to answer all your calls.
The point is, your broker should have sufficient time and focus to take care of your portfolio. However, if you’re perfectly comfortable executing trades on your computer without having to talk to a human being, then you can pick out an online discount broker and execute your trading on the internet. Just make sure that the online broker has a competent customer service department to address your problems and concerns.
Finally, read the brokerage contract carefully and pay attention to the fine print. If the advertised fees seem too good to be true, look out for hidden costs or interests. Don’t be afraid to ask questions especially if there’s any part of the contract that’s not clear to you. Remember, you’re already taking on a considerable amount of risk by investing in stocks. You at least deserve to have a decent level of security in doing business with your broker.