Do I need a Stock Broker?

By law, in the United States and in most countries throughout the world, all “securities transactions”, with few exemptions or exceptions, must be executed with or through a registered securities broker/dealer. Therefore, if you are going to be buying and selling securities, stocks, etc., you must do so with a broker/dealer registered with the NASD, the SEC and the states in which they conduct business. The short answer is yes. The question becomes which broker/dealer and what kind of broker/dealer and how do you go about choosing a broker. First, you need to decide what level of service you want or need. Since you are here reading Dr. Stock, I presume that you probably want help. If you do not need help or access to information like S&P reports, research, etc. the choice should probably be a discount brokerage. Discount brokerages will cost less per transaction that a full service firm. On the other hand, if you want more help, then a full service firm will be better prepared to serve you. If not, do not choose them. You may need to go through a few to find the firm and the representative that meets your needs and fits your personality. You need to be confident and comfortable with both the firm and the rep. A full service firm is not necessarily a large Wall Street Icon. There are many regional and small firms which you may find suit your needs. In fact, it may be the case that the smaller firm will try harder and devote more time to your concerns than you get from the “thundering herd” as it were. Most important is that the relationship suits you. Do not be reluctant to ask questions about the firm and its services. Keep in mind that if you are paying full service commissions, you deserve full service. If your broker cannot or is reluctant to get the information you need, get someone else. They are not there to tell you what to do, they may advise or recommend, but your portfolio, your goals take precedence.

In choosing a firm to open your account, you may want to call NASDR Public Disclosure at 800-289-9999. NASD Regulation is planning to have this information available on-line, however, as of this writing, the information is available by mail. You will be sent a report on disciplinary actions against individual firms and individual representatives. You may also want to contact your state securities regulators. Having a disciplinary history in and of itself does not mean that you should not conduct your business through the firm or rep. Most firms and many reps have at least something, but many of the items on the report will be nominal (equivalent to a traffic ticket), arcane, or old.  However, this report should form the basis of a discussion with the firm and rep and you should receive satisfactory explanations for each issue.