The wise investor knows that a good broker is a definite asset


October 02, 1994|By SUSAN BONDY | SUSAN BONDY,Creators Syndicate

People who don't think of themselves as financial experts are often reluctant to pass judgment on their broker's competence or attitude. But a question that keeps popping up in my mail is: How can I tell if I have a good broker?

Discount brokers are easy to evaluate because they are basically order takers. Discount brokerage firms usually don't provide investment advice. Their main business is order execution (and most do an excellent job at it). People who don't need advice or hand-holding are often better off at a discount brokerage firm.

The question of competence and attitude becomes important in a full-service brokerage firm. Full-service brokerage firms charge higher fees because they provide a complete range of services. Some brokers think of themselves as just sellers of investment products. Others will assume the responsibility for correcting errors, answering clients' questions thoroughly and suggesting better ways to invest.

The competence of full-service brokers can only be judged by their ability to help you achieve your financial goals. However, there are ways to evaluate their attitudes.

* How does your broker communicate with you?

Brokers with a bad attitude talk fast, use Wall Street jargon, get annoyed if you don't understand, don't get back to you on the execution of trades, don't keep their promises and don't return calls promptly.

Good brokers are patient and thorough. They take time to explain ideas and answer your questions.

* Does your broker help you correct errors, solve problems and get information?

Bad brokers expect you to catch, correct and follow up on accounting errors made by the firm. They will belittle or ignore requests for information that involve work or effort on their part.

Good brokers go out of their way to correct errors and make sure you get your money back with interest.

* Who is your broker taking care of?

Bad brokers push their "high-ticket" items -- those that produce the highest commissions for them. They often think only of the short term.

Good brokers consider your personality, financial circumstances and long-term needs in suggesting investments. Good brokers only recommend investments they understand and believe in.

A bad broker may make more money in the short run, but a good broker will build a happy, steady and loyal clientele for the future.

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