Brokers

Brokers make recommendations about specific investments like stocks, bonds, or mutual funds. While taking into account your overall financial goals, brokers generally do not give you a detailed financial plan. Brokers are generally paid commissions when you buy or sell securities through them. If they sell you mutual funds make sure to ask questions about what fees are included in the mutual fund purchase.

Brokerages vary widely in the quantity and quality of the services they provide for customers. Some have large research staffs, large national operations, and are prepared to service almost any kind of financial transaction you may need. Others are small and may specialize in promoting investments in unproven and very risky companies. And there's everything else in between.

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A discount brokerage charges lower fees and commissions for its services than what you'd pay at a full-service brokerage. But generally you have to research and choose investments by yourself.

A full-service brokerage costs more, but the higher fees and commissions pay for a broker's investment advice based on that firm's research. The best way to choose an investment professional is to start by asking your friends and colleagues who they recommend. Try to get several recommendations, and then meet with potential advisers face-to-face. Make sure you get along. Make sure you understand each other. After all, it's your money.

Getting informed is a good investment of your time

You'll want to find out if a broker is properly licensed in your state and if they have had run-ins with regulators or received serious complaints from investors. You'll also want to know about the brokers' educational backgrounds and where they've worked before their current jobs. To get this information, you can ask either your state securities regulator or the NASD to provide you with information from the CRD, which is a computerized database that contains information about most brokers, their representatives, and the firms they work for. Your state securities regulator may provide more information from the CRD than NASD, especially when it comes to investor complaints, so you may want to check with them first. You can find out how to get in touch with your state securities regulator through the North American Securities Administrators Association, Inc.'s website. You can go to NASD's website to get CRD information or call them toll-free at (800) 289-9999.