A good stock broker is someone you can rely on to give you solid advice and protect your interests. Trust is key. And you get that by building an ongoing relationship with your broker. They should also be someone who remembers you exist. Especially when things are happening that you need to know about as soon as possible.
Clearly you don’t build a strong relationship with a broker — or anyone — in just a day or two. It takes time. And patience. And asking lots of questions. If they seem short with you or distracted or give vague answers, they’re not the right broker for you.
What should you expect from a good stock broker?
Trust. Competence. Empathy. Good listening skills. Strong understanding of market fundamentals. And an even stronger understanding of YOU and your specific needs. A good relationship with your broker comes when they see you as an individual — not just potential dollar signs.
They should ask about where you are in your life and career. And not just as a pleasantry. They should try to match what you tell them to what they suggest for your investments. Also, they should clearly understand and respect your personal investing goals. And your tolerance for risk.
And if your ideas are very different from theirs, they should listen carefully. You want them to show they really hear your words, and are adjusting their investment strategy accordingly. Or they should explain why not if they have good reasons. It’s all about the willingness to listen and talk.
What are some signs of a bad broker?
Aside from not listening, one of the biggest red flags for me is constantly selling — and seeing me only as a money mill. I had one broker who actually showed anger when I said I don’t want any stock funds that charge a fee to buy or sell. These are called “load” funds. (I only buy no-load funds now.)
Look, I don’t blame someone for trying to make money. But there are polite ways to handle that. In fact, I still work with brokers with whom I have a very good relationship — even though they’ve tried to (pleasantly) pitch load funds now and then.
But they really get who I am as an investor. And so our relationships have grown over the years. They also don’t just mouth standard advice without adjusting to my specific wants and needs. After a while, you can tell when someone is just giving you words out of their selling manual.
Also important, they don’t just take my money and forget me. Although it’s good to check in with them once in a while. A good broker also has lots of other clients. And they may be more in contact with ones who trade actively. Which, btw, I don’t — at least not for many years.
So how do you start building a relationship with your broker?
The way I check out a new broker is by setting up a test period. Start small. Work with them. Check in every now and then, even if you don’t have more to invest. See how they relate to you.
One of my brokers, Loren, is someone I found through a cold call. I happened to have some IRA money to invest, and he answered the phone when I called. He’s part of the brokerage arm of my main bank, and was the next broker in the queue for new customer calls. Just luck of the draw.
So we talked for a while, and he seemed pleasant enough. But I still had no real way of knowing how good he is or isn’t. I decided to invest a small sum and see how things go. And he actually called once in a while. We chatted about the market and other things. And he didn’t push. He never pushed.
Next time I had money to invest, I called Loren. And we did it again. I liked his suggestions. They showed he got who I am. And I continued to get a good feeling from him. Over time, our relationship grew. And now he handles a good chunk of my investment money.
A few more thoughts
I wish I had a magic wand that could tell you for sure if someone will be a good broker for you. I don’t. But I’ve found that it pays to take the time to see how well they listen and react to you. And how well their recommendations reflect your interactions. No need to rush it on your end.
Building a relationship with your broker takes time. And you have to remember not to be intimidated. It’s your dime they are investing for you. (Hopefully more than a dime.) And none of them know it all. If they did they’d be relaxing in their mansion on some beautiful island.
Probably best to think of it as a relationship meant to grow over time. But one that is about you and your needs — not about making them happy. They’ll be just fine, even if you don’t take every one of their recommendations. And over time, you’ll learn together what works best for you.
IMPORTANT TIP: Just be sure to come armed with your own knowledge, as best as possible. It will make you feel more comfortable. And it will help you ask good questions.
Most of all, it will help shape the relationship in a way that doesn’t put all the power in their hands. Even the good ones do better when you bring your own ideas to the discussion.
More posts to help