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10 Tough Questions to Ask Your Stockbroker

While selecting a broker shouldn’t be quite as complex as choosing a spouse, it’s definitely not a decision you should make in haste. After all, this is the person you are banking on to help you handle your investment dollars. So, whoever told you that it’s unnecessary to subject your stockbroker to an interview before going with him/her is obviously not a good adviser.

Before your first meeting your potential stockbroker, you need to arm yourself with tough questions that will help you really figure out if he or she is right for you. After all, your money is at stake here, and you should be in control. The essence of asking questions is not to make your stockbroker look stupid. No! It is far from that.

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Your aim here is to be sure your hard-earned money is going into safe and professional hands. Here, I have put together a list of 10 tough—and deceptive questions—to ask a potential stockbroker to weigh their worth before deciding whether you should go with them or not.

Choosing a Good Stockbroker: 10 Tough Questions to Ask Your Stockbroker

Table of Content

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Question 1: Are you registered?

As an investor, you shouldn’t make assumptions. You need to be certain that your stockbroker meets all standards set by their own profession. If possible, ask to see their credentials. If they are fretting, that’s a red flag that you should run.

You don’t want to put your money in the hands of a stockbroker who isn’t registered. This question might sound simple, but an unregistered stockbroker will not see it as such. Only a registered stockbroker will confidently give a quick answer.

Question 2: How many years of experience do you have? For how long have you been a stockbroker?

Investment is what we are talking about here, not gambling. You don’t want to take any risks with your hard-earned money by entrusting it to a newbie stockbroker with very little practical experience of how things work in the stock market. Again, an inexperienced stockbroker will falter while responding to this question.

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Question 3: What commission or fees do you charge in addition to the amounts I will pay you?

Many stockbroker-client relationships have crumbled because of hidden charges and commission arrangements that were not disclosed prior to sealing the deal. So, you want to ensure that your potential stockbroker lists out all the fees you will be paying now and later—and why you will be paying them.

Question 4: What are the margin requirements?

You need to determine your stockbroker’s margin requirements, such as your initial margin as well as maintenance margins. In other words, the question goes, “How much money must I have in my account before I begin trading, and how much additional capital do I need to deposit before executing specific option strategies?” A good stockbroker will respond not only by giving the figures, but also by explaining how the margin requirements are calculated.

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Question 5: Can I get any references regarding your expertise?

Whoever said word-of-mouth no longer counts was definitely not talking about choosing a stockbroker. Word of mouth still counts a lot. Don’t be scared to contact other people who have worked with the stockbroker. Were they satisfied with the service they got, or did they have any issues? Were there any surprises after they started trading, or did things go as expected? The response you get from these past clients can inform your decision to select or ditch a stockbroker.

Question 6: What are your best investment or trading strategies?

You need to know what investment strategies your potential stockbroker will adopt with your money. Will they be making long-term purchases, short sales, margin transactions, or options? Do they adopt a single proven strategy for all their clients or they use a different strategy for each client? Don’t just accept straight answers. Demand explanations, too.

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Question 7: Where will you keep my money?

It’s important to know where exactly the stockbroker will keep your money. Note the name, address, and telephone number of the custodian. A stockbroker should readily provide these details unless they are trying to hide something.

Question 8: If you are such a good investor, why are you wasting your time with me?

This is a good question for stockbrokers with intimidating credentials or those who claim having several years of experience. The question is a doozy that helps you differentiate the really experienced stockbrokers from those who blow smoke.

Question 9: Do you personally trade in the securities that you recommend to me?

If the stockbroker is trading in the same securities they are recommending to you, chances are that they are giving you a great advice. But even if they are not, don’t raise a red flag. Just ask why. If they give a reasonable answer, you can still go ahead with them.

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Question 10: Why should I trust you?

Of course, a good stockbroker should be able to give you convincing reasons why you should entrust them with your hard-earned money. A typical stockbroker will cite experience, past successes, and other reasons. If the reasons are just not convincing enough, walk away.