How to choose the right brokerage firm

Knowing how to choose the right brokerage firm is just as important as knowing how to choose the right stock. There are currently 13 brokerage firms authorized by the Jamaica Stock Exchange to operate in Jamaica, all of which place differing emphasis on particular areas. You may be wondering why you even need a stockbroker to buy shares, the truth is, it is more costly to purchase shares on your own than it would be through a firm. According to the Jamaica Stock Exchange website, shares not traded on the Jamaica Stock Exchange will attract Stamp Duty and Transfer Tax. These charges are considerably higher than the customary brokerage fees.

Here are three areas you need to consider before making your final decision when it comes to choosing a stockbroker.

Fee Structure

The first thing you’ll want to consider when you‘re choosing the right brokerage firm is their fee structure. Though there might be a few standards that apply across the board it is important to ask the right questions before you make your final decision. Once you’ve chosen your firm, you’ll also want to stay informed for when fees are adjusted. Brokers typically charge a commission per trade, so it is also important to ask if that fee is reduced if you trade more in any given month.

Services they offer

Most people will likely want to work with a full-service investment broker because of the wide range of services that they offer. With a full service firm (like Ideal) you have access to industry professionals who can advise you on the best course of action to take, buy or sell stocks on your behalf and help you file important paperwork.

Trusted reputation

In looking for firms that have a good reputation it is not uncommon to ask friends or family members who have been investing for a while for their thoughts on the firm that they work with. It is important however to also do your research. Firms with a longstanding reputation for excellent service to their clients are often the best options.

It is important that as a savvy investor you are upfront and clear about your goals and expectations of each other. This is likely a relationship that you will maintain for a long time and in order to get the best service you also have to do your part by honouring your agreements and settling your transactions in a timely manner.

Here are few questions you should ask your broker before you make your final decision.

Do you invest in the same stocks that you recommend to your clients?

How well did those investments do?

How long has your company been around?

What are your holdings in other companies?

During your online research and during your conversation also look out for answers to these questions:

What is their Current Ration? (Current assets relative to Current Liabilities)

Are they in good financial standing?

Once you have done your research and chosen the right firm that suits your overall needs and goals it is time to set up a meeting and open your account.