What to Expect from a Broker

The traditional broker is a "full-service broker." As the name implies, this is someone who can handle all manner of transactions and provide information to guide your investment choices. Technically, if he is a broker, he is selling you products and services, rather than selling you advice.

That said, many full-service brokers go by other titles, notably "investment consultants" or "asset managers." Thus, no matter what an advisor gives as a title, you want to qualify her services, not only in terms of what she provides you but what her responsibilities are.
Unless she is registered as an investment advisor, she does not currently have to live up to a "fiduciary standard" to put your interests first.

Unfortunately, millions of customers pay the full-service rate without getting full service.

A relationship with a full-service broker should be part-guidance, part-research, and part-execution. In an ideal relationship, the broker gathers information, passes it to you, outlining each prospect and supporting it with analyst recommendations, research reports, and other data. Once you have made your decision, the broker makes the trade.

Where to Start the Search

Brokerage services tend to be a word-of-mouth business, but the truth is that many established, experienced brokers started working their way up taking the people who walked in to the office, and making cold calls -- dialing for dollars -- hoping they might find an interested customer. Don't assume, therefore, that you'll be poorly served if you get a phone solicitation or simply walk into the most reputable firm in town; just do your due diligence to make sure you're not walking into trouble.

Many brokers hold local seminars, designed to educate consumers, then, draw them in as clients. Don't be bashful about attending these seminars, which usually are free, and which may include a lunch and promise a no-obligation financial analysis. Just remember that the fact that someone can fill an auditorium or a fancy restaurant does not make him the right broker for you.

If there is a local stockbrokers club, put a call in to see if you can attend a meeting. Most of these clubs have regional executives in to talk about their company; you can watch a broker ask questions and do some personal research.

By Chuck Jaffe
Chuck Jaffe is a senior columnist and host of two weekly podcasts at MarkWatch. He has also been a guest speaker on several television and radio shows.

Copyrighted 2016. Content published with author's permission.

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