Brokerages in Stock Trading/Investing (continues...)

Discretionary Accounts
Discretionary accounts are a special type of brokerage account that permit the broker to buy and sell shares for you without first contacting you for approval. You can also set up a discretionary account with an investment advisor who can make the same unauthorized transactions. If you’re going to set up a discretionary account, it’s probably a better idea to do so with your financial advisor as the authorized party since they (at least in theory) are supposed to be trying to maximize your financial well-being. Brokers, on the other hand, are not responsible for making you money; they are responsible for making themselves money and so they might make frequent unnecessary transactions in order to boost their commission.
Broker Research
Before sitting down to decide which broker you want to open an account with, you should probably do a little bit of research about the person who will be handling your transactions. One way to find out about a broker’s background is to call the National Association of Securities Dealers (NASD), a self-regulatory agency of brokers. The NASD can tell you, for free, whether your broker has ever been convicted of a securities-related crime or whether disciplinary action has been taken against him or her.



The other major resource that you can use to find out about your broker is the Central Registration Depository (CRD) system, a computerized database that has information on over 600,000 registered stockbrokers. The CRD can tell you about the broker’s employment history, his or her securities examination scores, licensing information, and any record of disciplinary action. In order to access the CRD, simply ask your prospective broker for his or her CRD number and then contact your state securities commission or the NASD.
Choosing a Broker
When choosing a brokerage, be cautious of advertising, especially the advertisements with comparisons of commission schedules. Instead, focus on objective ratings and use the list of considerations below to help you make your decision:

• Commission rates: especially for the types of trades you typically make.
• Range of services: make sure they offer everything you need (for example, if you will be trading foreign stocks, confirm that they are equipped for this).
• Quality of service: check the Better Business Bureau, NASD Regulation or your state attorney general's office for complaints. 

• Minimum to open an account 
• Account protection: confirm that they are SIPC insured. This will cover you for up to $100,000 in cash and $500,000 in securities. If you need more, discuss it with the broker. 
• Fees and investment options for IRAs 
• Margin rate (if you plan to buy on margin) 
• Money market account yield 
• Commissions on no-load mutual funds 
• Inactivity fees
• How long you have to wait on hold when calling
• Local offices
• Other services (check writing privileges, credit cards, etc.) 

When choosing an online broker, the following extra considerations are important:

• Use of a secure server to handle all transactions. 
• Types of investment vehicles: stocks, options, bonds, futures, mutual funds, foreign securities. 
• Types of orders that can be placed. Most allow market orders, stop orders, and limit orders. 
• Order execution speed. Some brokers use "drop copy" trading, in which a live broker reviews orders before they're executed, which can delay the trade by up to ten minutes. 
• Order confirmation speed. 
• Support, preferably by both phone and email, and preferably 24-hour. 
• Amount of account information (and speed with which it's updated). 
• Free or cheap real time quotes. 
• Free or cheap research, market data and news, portfolio tracking, alerts, and planning tools. 

It’s a good idea to narrow down your list of potential brokers to a few that seem to meet your needs, and then to open demo accounts with each to see which you like best.