Here we discuss how to compare advisory brokers or brokers who offer a full range of services. 

Why is it necessary to compare brokers?

Licensed brokers and financial advisers are supposed to give investment recommendations according to their clients’ needs and objectives; however, this isn’t always the case.

Some brokers recommend investment product from which they will receive higher commissions from. Likewise, there are brokers who can only access a small selection, and this may deprive the investor of potentially larger returns that skilled brokers with access to a bigger investment selection can achieve.

Choosing a broker is a lot like being in a television dating show: one or two candidates are sincere, while others are just after the potential client’s money. Investors need to assess their broker candidates carefully so they don’t get blindsided.

Factors to consider

When comparing brokers, investors should ideally meet with each of their candidate to discuss their investment objectives and gauge how well each broker understands their needs. Likewise, investors shouldn’t be shy about asking questions because their financial future is at stake.

Below are some important factors to consider and ask each candidate during the selection process.

Licence
Any individual who offers brokering or advisory services must have an Australian Financial Services Licence (AFSL) regardless of the size of their business. This means even independent brokers and advisers who will only advise one client must still be able to present an AFSL.

Licensed brokers and firms are registered with the Australian Securities and Investments Commission (ASIC) and listed in ASIC Connect’s Professional Registers.

Expertise
Some brokers may focus on general trading and advisory services, while others specialise in their choice of asset classes or sectors. It’s important to take the broker’s expertise into consideration, especially when the client prefers specific types of investments (i.e. impact investments, stock trading), because it may determine the quality and accuracy of their advice or recommendation.

Likewise, be sure to review the Financial Services Guide that brokers and financial advisers are required to provide potential clients because this document details their expertise and the scope of services they are authorised to offer.

Costs
The cost of employing a full-service broker is higher, so it’s important for investors to be aware of all possible fees they will pay before deciding on a broker. Asking about the following fees is highly recommended:

• Fees
  Ask about all the fees the broker will charge and how fees are scheduled. Would the broker charge a management fee on a regular basis or, like a stock broker, would their service fee be charged on a per brokerage basis? If the client isn’t satisfied with their performance, would they charge a termination fee?
• Minimum deposit
  Ask whether the broker will require a minimum deposit per transaction and what fees are charged against the deposited money.

Availability
Investors pay higher fees for full-service brokers because of the services they offer, so it’s only natural that it wouldn’t be difficult for clients to contact them. The broker should be accessible to their clients should they wish to discuss their portfolio and ask questions.

Ensure that the broker in question can guarantee their availability to clients – within reason – and that they are accessible through the client’s preferred medium of communication. For instance, the broker should be able to accommodate the client if they prefer a face-to-face meeting twice a month over speaking on the phone.

Investment choices
Some brokers have a limited spread with the investments they can offer. It’s best to ask each broker their scope of investment offerings so that investors don’t end up limiting their portfolio. 

Likewise, consider asking what tools are available to their clients if they wish to learn more about recommended products. Brokers may be more knowledgeable about the products, but it is still the investor who must decide whether to accept the advice or not.

Client feedback
Consider asking the broker’s other clients if they are satisfied with the type of service they receive. Simply go to appropriate online forums and ask about other people’s experience with the broker, whether they encountered problems, and how well the broker resolved any issue.

Invest in yourself

Aside from choosing a reliable broker to manage their investment portfolio, investors should also consider investing in their own financial literacy. Knowing more about investments could help them make informed decisions with their portfolio and the people they are entrusted to.