Knowing What to Look at When Selecting an Investment Stockbroker or Adviser

By Tony Levene

Part of Investing For Dummies Cheat Sheet (UK Edition)

Most investors in the UK don’t need a stockbroker, except occasionally, when you can find a no-frills firm to buy or sell shares for you online. But if you’re more serious, then shop around to find a stockbroker (or adviser – the terms are often interchangeable) who’s right for you.

Areas for your personal research might include:

  • Costs. This shouldn’t be your first consideration, but it’s essential all the same. Excessive costs can wipe out gains from a clever investment strategy. Very excessive costs can turn good decisions into instant losses.

  • Level of service. Consider the experience of your contact or account executive, as well as whether email alerts and regular newsletters or other forms of stock recommendation will be sent out. Find out whether the broker offers a portfolio based on unit trusts, investment trusts or exchange-traded funds.

  • Protection from churning. Unscrupulous brokers try to earn more from your investments by overly frequent buying and selling. You should agree to a limit on their trading activity.

  • Size of portfolio. Make sure that you’re well within the broker’s parameters. If the broker wants a minimum £25,000, then having £25,001 isn’t much use because you could easily fall below the line if markets turn against you. Ask what happens if your fortune shrinks through bad decisions or because you choose to spend some of your money.