FOOL'S EYE VIEW
60-Second Guide To Choosing A Broker

By James Carlisle
August 5, 2002

In just 60 seconds, we'll usher you through the six major steps to choosing and setting up a broking a account. So pin your ears back and hold on tight...

0:57: Decide how much you'll be investing

Will it be £1,000, £10,000 or £100,000? Some brokers require a minimum initial deposit. Because of different commission structures, it will also make a difference how big you expect to make your 'chip size' for individual investments. So, figure out how much dough you plan to start with and how big you plan to make your chip size.

0:50: Think about what you'll be investing in

While we're partial to shares, you may also want to invest in funds (particularly index trackers), corporate bonds or gilts. You will also probably want to invest via an Individual Savings Account (ISA), or maybe a Self-Invested Personal Pension (SIPP). Only some brokers will offer all of these, so make sure your broker does what you need it to.

0: 42: Consider what type of account you want

Decide how you want to hold your shares. With a 'certificated account', you'll be given a share certificate and your name will actually go on the shareholders' register. That means that the company will send you its annual accounts and personally invite you to its shareholder meetings. However, it makes the process of buying and selling slow and laborious and these accounts are in the minority.

Instead, most people go for a nominee service, where the broker holds the shares in a nominee account on your behalf. If you want to go to the shareholder meetings, you may have to get your broker to certify that you're a shareholder. They might charge extra for this type of thing, or they may not offer it at all.

A third option is to get a CREST-sponsored member account. This means you get your name on the shareholders' register and also use efficient paperless trading, but you have to pay an annual fee to the stock exchange.

There's more about the different options in the Fool's Online Broking Centre.

0:31: Compare broker fees and services

Now we're down to the nitty-gritty. You need to work out and compare how much different brokers will charge for the size and type of transaction you'll be doing. For a start you can compare brokers with our suitably named Broker Comparison Table. These brokers sponsor the Motley Fool and you should cast your net wider with other brokers to see what they can do for you.

0:21: Do the paperwork and sign the cheque!

Setting up an account is usually as easy as downloading the application forms, signing them, and folding them nicely into an envelope with a cheque to provide an opening balance to your account. Some brokers can arrange to take money for your purchases via direct debit instead. You'll receive confirmation of your ability to start trading in pretty short order. Voila!

If you want to transfer holdings from an existing broker to a new broker, then start by setting up an account with the new broker and let them know that you want to transfer shares to them. They should be more than happy to make the necessary arrangements if you sign the odd letter (that they'll draft for you).

0:03: Revel publicly

You're now "in the know", so you'll want to practise a few lines to use at dinner parties: "I'm in the market for the long haul. Still, I couldn't help but peek at my account twice today." Or "I'm thinking of donating part of my profits to Fulham Football Club -- I hear Fayed's a bit short."

Whew! Done in just under 60 seconds - if you didn't get held up along the way. Congratulations, Fool! You're now in control, but let's not get carried away. Most investors are overconfident and trade too frequently, so it's worth taking a few deep breaths to start with. It's also worth taking a look at our guide on Building A Portfolio.

You can also see everything else we have to say about choosing brokers (well nearly) in the Fool's Online Broking Centre.