There are many factors to consider when selecting an online broker. The comparison table gives you some of the basic factors such as trade costs and minimum fund requirements, but there are other factors to consider. A quick note, any thoughts expressed here are my opinions only, and you should also do your research. Selecting the right online broker isn't a make or break decision, but switching to a different broker isn't without cost, so you should choose with care.
Some factors to consider include:
- Customer Service - This is number one for a reason, you don't want to be stuck hanging on a phone or waiting for an e-mail to some back to you for hours at a time. Service includes both quick response time and correct answers. If you can find current users, ask about their experience with CS. Most of the major online companies are pretty good with customer service, but you don't want to be wasting time dealing with this.
- Pricing - Since the comparison chart goes into this, I will not go into detail, but price still in a major concern. Despite the fierce competition out there, prices and minimums are still all over the place. Read carefully before signing up, and understand what you are getting into.
- Resources - Most online firms offer some sort of research resources, so you can check out different companies and see how they have done in the past and check out annual reports and a plethora of other items. Some offer very little along these lines. Do you need to be able to check out companies before you invest, or are you just following the suggestions in a newsletter or the advice of "Uncle Bob"? I would highly recommend checking out any stock before blindly following a recommendation.
- Company History - You may find that a particular firm has all the things you are looking for and you are excited to get investing, but first you need to see if they are legitimate or what their history is. Did they just open their "digital doors" last week? Are there complaints at the Better Business Bureau about their work practices? Don't be in a rush to be the first user at a firm, even if their pricing is great. Most times when things look to good to be true, there is a reason for it.
- Cash policy - Most firms will give you some minimum return on cash that is floating in your account. Sometimes it is little details like this that will tell you about the company. "The devil is in the details" as the saying goes, and a company that brushes over the details, may not give you the service that you deserve.
- Full Service or Discount - We've gone over this in the selecting a broker section, so I won't go into detail, but you need to decide if you are looking for full or discount service. Generally on-line means self-service, but you can find online full service brokers. Remember that the more you know, the less you need full service, but again, this is a personal choice.
- Last, but not least, is availability. In the early days of the internet, America On-line would boast of 24 hour unlimited access. The trouble was that many times when trying to get online, dial-up users would get non-stop busy signals during peak hours. Flash forward to your broker. You have a stock that you want to get in on today if their site doesn't have enough access for many users at one time, you may get shut out. This is less an issue lately, but still is a factor with some smaller outfits.
There are many details in this article you may want to review again before selecting your on-line broker, and this isn't a panacea of information. You will need to do your due diligence when selecting a stock, start by practicing due diligence in finding your on-line broker.