How to choose a broker to start trading on the exchange

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

You trust the intermediary with your money, so you should take the issue seriously - almost like choosing a spouse.

Why do you need a broker

In a broad sense, a broker is an intermediary in transactions that helps you to crank up a particular case for a fee. For example, a customs broker formalizes goods and makes sure that everything is in accordance with the laws, and a mortgage broker seeks out suitable offers for clients.

But most often we are talking about stock brokers. These are professional participants in the securities market who conduct transactions on behalf of the client. The minimum set of services for these specialists looks like this:

• registration of a client on the exchange;
• buying and selling securities and other financial instruments on his behalf;
• keeping records and providing it to the client;
• payment of taxes on income from transactions.

In addition, the broker can provide advice or trust management of your assets. In any case, you trust him with your money in one way or another, so it is extremely important to choose the right broker.

What to look for when choosing a broker

Availability of a license

The broker needs to be licensed, so check immediately if there are candidates on the relevant list of the Central Bank.

If you are interested not only in access to trading on the stock exchange, but also in consulting or trust management services, it is better to choose legal entities that additionally have licenses for dealer activities and securities management. Scanned copies of documents allowing to conduct work are usually presented on the broker's website. I recommend checking their authenticity using the publicly available database of financial institutions on the Bank of Russia website.

Maxim Fedorov Vice President of QBF

work experience

Everything is simple here: if a company has been on the market for a long time, it has already acquired a certain reputation by which one can assess the quality of its work. Perhaps this approach is dishonest in relation to novice brokers, but you are risking your money. It is better to give them to a trusted intermediary.

I recommend paying attention to those players who have been engaged in brokerage activities for more than five, and preferably ten years. During this time, truly professional financial organizations manage to work with hundreds or thousands of clients, whose reviews can be found on Internet forums.

Maxim Fedorov

Personal finance and investment management expert Igor Faynman advises paying attention to the ratings that are available on numerous analytical sites or, for example, on the website of the Moscow Exchange. They can be used to identify major players.

All large and reliable banks have brokers. And I recommend choosing a broker at the bank where you are served. You can have a green bank, or a blue one, or a red one. They are all reliable and safe. Beware of unfamiliar names with aggressive marketing: chances are, they want to trick you.

Igor Faynman

Infrastructure

It is possible to draw conclusions about the effectiveness of the broker's work by the quality of the infrastructure that is at his disposal. The more extensive it is, the more comfortable it will be for you.

It is important whether the company has an office, how developed its website is, and whether there are online services that allow you to use brokerage services remotely. Before concluding an agreement with a broker, I advise you to evaluate the level of analytical support that his clients can use.

Maxim Fedorov

Online services make your work much easier. If a broker has a convenient, intuitive mobile application, it will be much more pleasant to interact with it. Moreover, it is possible to evaluate the services even before the conclusion of the contract. According to Petr Shcherbachenko, Associate Professor at the Financial University under the Government of the Russian Federation, most broker applications are available in demo mode - download, try and choose the most convenient platform.

Service cost

This is one of the important parameters. Brokers do not work for charitable reasons. You will have to pay for the services anyway, but you can choose how much you pay.

Usually brokers take a percentage of the amount of transactions per day, and the higher the turnover, the lower the percentage. But sometimes the broker sets a fixed commission, for example 0.5% of the transaction, but not less than 30 rubles. Some brokers provide pricing plans. For example, “Investor” is for novice investors who are mainly focused on long-term financial investments, “Trader” is for those who are focused on speculative short-term transactions, and “Premium” is for clients with a large amount of funds.

Pyotr Shcherbachenko Associate Professor of the Financial University under the Government of the Russian Federation, Candidate of Economic Sciences

Accordingly, you need to think about how you will invest and compare the proposals with the budget that you are ready to allocate for brokerage services.

Pay attention to the nuances. For example, low fees may hide high mandatory payments. Then the costs will be high, even if you rarely make transactions with securities.

Expert Igor Faynman adds that it is possible to bargain over the commission.

Brokers can change and reduce commissions - tested on their own experience. The final rates will depend on your persistence.

Igor Faynman

Set of securities

Different brokers provide different opportunities for building an investment portfolio. For example, as a standard, brokers give you access to the Moscow Stock Exchange, but sometimes also to the St. Petersburg Stock Exchange, which gives you access to a large number of foreign securities.

System for withdrawing dividends and coupon income

You should pay attention to this point if you are going to open an individual investment account. It allows you to take advantage of the tax deduction. But for this, money cannot be withdrawn from him for three years. However, some brokers transfer dividends and coupon income to a separate account. This allows you not to lose the right to deduction, and to receive money.