As an investor, you depend on your broker to be an advisor who will share critical information that is in your best interest. However, it is no secret that many of these individuals are more interested in lining their own pockets. So, how can you tell if your broker is getting you the best deal? In this article, we’ll give you some tips to help you decide if your broker is working for you or themselves.
Broker commission and investments
A broker’s commission is an important piece to understand. These are the fees you agree to pay the broker for expediting a deal. Depending on what you’re investing in (see diversifying investments), there are multiple ways you may be paying this fee, and it could be affecting your returns without your knowledge. When it comes to marketable commodities, such as stocks, the commission is most often a fixed-rate, generally under $10 per exchange. By investing with a full-service brokerage firm, chances are you’re paying higher fees based on the number of valued shares being traded.
It’s important to minimise the cost of fees, but don’t begin to trade more just because the charge is low. If you broker has you trading regularly, but not gaining performance, you’re better off buying low-cost index-based funds and holding them for a time.
Commission pays for regular contact
Brokers who are keeping your best interest a top priority will maintain frequent contact. They will connect with their clients in both good and bad times. They will inform you of any necessary changes to the portfolio strategy, or if the firm has a new research report you may be interested in. Most importantly, a good broker will discuss your income and ability to save, along with any long-term goals; at least twice a year. Your broker should also review any plans that are already in motion, such as college savings.
Performance benchmark- Money are you getting enough
As an investor, it’s imperative that you check your portfolio against the performance of fund managers. This helps to ensure your investment performance isn’t falling behind the larger market. This reference point is also to make sure your broker’s performance reflects the average in the industry. If your broker is falling short, ask him or her why. Be an investigator. You are paying good money for their assistance, so make sure you’re getting your money’s worth. Your broker’s job is to make you money- it is your job to make sure you have the best advisor for you.
Our tips for better broking are designed to help you make decisions. However, this is from one person’s perspective, and you should always seek professional financial advice before proceeding with a conclusion.
If you would like to receive our newsletter:
Subscribe to our mailing list
