Categories
3. Broker for Intermediate

Narrow the Field

Now that you have a clear idea of what your investment goals are and what basic services you’ll look for in your ideal brokerage, it’s time to whittle down your options a bit. While there are certain brokerage features that will be more important for some investors than for others, there are a few things any reputable online brokerage should have. With such a wide range of available options, checking on these basic necessities is a great way to narrow the field quickly.

Stock Broker Regulation and Trust

Is the brokerage a member of the Securities Investor Protection Corporation (SIPC)? There will typically be some kind of notation or disclaimer at the bottom of the home page. You can quickly look up the brokerage on the SIPC website.

Is the brokerage a member of the Financial Industry Regulatory Authority (FINRA)? This should also be very clearly noted in an easy-to-find location. You can look up brokerages on FINRA’s BrokerCheck website.

etrade stock brokerage is regulated

If the brokerage offers checking or savings accounts, or any other deposit products, are they covered by the Federal Deposit Insurance Corporation (FDIC)? Investment products – such as brokerage or retirement accounts that invest in stocks, bonds, options, and annuities – are not FDIC insured, because the value of investments cannot be guaranteed. If the brokerage offers CDs, Money Market Deposit Accounts (MMDAs), checking, or savings accounts, however, they should be fully backed by the FDIC.

What kind of insurance do they provide to protect you in case the company fails? As a member of the SIPC, the company should have insurance with a per-customer limit of at least $500,000, with $250,000 available for cash claims. If the company adheres to the Customer Protection Rule, it should also provide additional coverage above and beyond the basic requirements of the SIPC.

image with Vanguard's account protection terms

Is there any kind of guarantee of protection against fraud? Will the company reimburse you for losses resulting from fraud? Make sure you double check what the brokerage requires of you in order for you to be reimbursed. Find out if you have to provide any documentation or take specific precautions to protect yourself.

What are current customers saying? Try searching online for consumer reviews of the brokerage, using keywords like “insurance claim,” “fraud protection” and “customer service.” Of course, online reviews should typically be taken with a grain of salt – some people just like to complain. However, if there are several users from different sites all lodging the same complaint then you may want to investigate further.

Online Security and Account Protection

It’s important to know how well a brokerage helps you protect your information.

Does the brokerage website offer two-factor authentication? Do you have the option of activating a security feature in addition to your password? Common options can include answering security questions, receiving unique, time-sensitive codes via text or email, or using a physical security key that slots into your USB port.

What kind of technology does the broker use to keep your account safe? Find out if the broker uses encryption or “cookies,” and if it clearly explains how it uses them to protect your account information and how they work.

Does the company ever sell customer information to third-parties, like advertisers? The answer should definitely be no.

Brokerage Account Offerings

Since the types of tools you need will depend on your goals, you should also do a quick check for the following items to weed out brokerages that simply won’t meet your needs.

What kinds of accounts does the broker offer besides standard (taxable) investment accounts? For example, if you have dependents, find out if you can open an Education Savings Account (ESA) or a custodial account for your child or other dependents.

Can you open a retirement account? Look into whether the broker offers Roth or traditional retirement accounts and if you can roll over an existing 401K or IRA.

Are there different products for different investing goals? For example, find out if the broker offers managed accounts. Also, find out if there investment minimums for different types of accounts.

Can you manage retirement accounts for employees through the brokerage? This may apply if you’re a small business owner. These types of accounts include SIMPLE or SEP IRAs.

Does the brokerage offer Self-Directed IRAs or Solo 401K options? This applies if the only employee in your small business is you.

the broker etrade's retirement center page

One reply on “Narrow the Field”

Leave a Reply

Your email address will not be published. Required fields are marked *