Are you getting all you can out of your current brokerage firm? Choosing the right broker and maximizing the services you get can be the foundation for successfully managing your investments.
Three factors to consider are: Does the broker offer the services you want? Are the trading costs relatively low for those services? Does the broker offer better value than others do?
Look for the services you want
One of your top priorities when seeking a broker should be whether that firm provides the services you need to achieve your investing objectives and implement your strategy. For example, does the broker allow you to buy and sell stocks, options, ETFs, mutual funds, bonds, and IPOs?
Additionally, you may want to seek a broker that offers all the tools and resources necessary to make informed decisions, whether that is on your own or with the help of a professional. Does the broker offer:
- Market research and learning resources
- Timely, topical news, insights, and market perspectives
- Helpful investing guidance and retirement planning
- Financial tools and calculators
- A wide range of investment products including IRAs and managed accounts
- 24/7 support and customer service
Keep costs low
Along with making smart investing decisions with the aid of tools and resources, maximizing your total return involves managing costs. Price is a top consideration, particularly for active investors. There are a number of costs to consider when choosing a brokerage firm. Commissions are a primary one for the active investor.
An even better way to lower your commission costs would be to consider investments that don’t have any. For instance, Fidelity.com offers more than 4,700 no-transaction-fee funds1, as well as the ability to purchase online 91 commission-free ETFs.
Costs aren’t a factor for just stocks, options, and funds. If you have bonds in your portfolio, buying-and-selling costs should be considered as well. Avoid brokers with hidden fees or markups. Fidelity has fully transparent bond pricing, with a $1 concession per bond online, and no hidden fees or markups.
Seek total value
Although costs are an important consideration, if you are thinking only about commissions when choosing a broker, you might miss the bigger picture. “Commissions are only one part of it,” says Ram Subramaniam, president of Fidelity Brokerage. “Execution quality, including price improvement, is a key part of our value proposition, especially for active investors.”
Price improvement occurs when a trade placed while the market is open executes at a better price than the prevailing National Best Bid or Offer (NBBO). For example, if a customer places an order to buy 200 shares of ABC stock “at the market,” and the bid-ask spread at the time is $15.75–$15.95, the customer is “due” the ask price of $15.95. However, if the customer’s order executes at $15.90—$0.05 below the ask price—that’s a $10 price improvement.
According to June 2016 data, Fidelity’s average price improvement on a 1,000-share order is from six to nine times better than the industry average,2 which can be a huge win for customers.
Customers can see the dollar value of price improvements on their orders, too. When an order that received price improvement has executed, customers can go to the “Activity” tab on Fidelity.com and see the price improvement amount, along with the rest of their order details. (This detail is available only on the day the order executes.) Also, customers can see the total number of price-improved orders and the dollar value of savings from price improvement on a month-to-date, year-to-date, and rolling 12-month basis on Fidelity.com.
There’s nothing wrong with being picky when deciding which brokerage firm to go with. After all, the decision you make could have a big impact on your bottom line. When making the choice, make sure your broker is adding value by providing all the services you need—at a low cost. That’s called getting your money’s worth.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917