How to Choose a Stock Broker

“I do all my own research and read your materials plus others, so is the best option to trade with a broker or online?” This stock trading question comes from Steven F.

Let’s just get one small technicality out of the way; regardless of who you trade through it is a broker. Whether that be a human being or an online platform, they are both considered a stock broker.

If you do all your own research and make your own trading decisions, then there is absolutely no reason to pay a ‘human’ broker. Or another way, unless a ‘human’ broker is offering you considerable value-add that justifies their costs, then trade online. A ‘human’ broker will tend to have a minimum ticket charge of $100 which is up to 10x what an online broker will charge, so they’d need to have a very strong value-add proposition.

And some do. For example, after the GFC when many companies were raising capital you needed a good broker relationship to get a piece of the action, and many of these offerings were extremely lucrative for those clients. An online account really didn’t allow you to participate so you missed out. Another example would be some kind of complex option trading where you needed a market-maker to quote pricing for you. In these instances a ‘human’ broker can be beneficial.

If you’re a regular Joe trader then an online broker is all you need.

Most regular Australian online stock brokers offer more or less the same. A Commsec or E*Trade tend to be upper end of commission charges, and SelfWealth and Bell Direct the lower end. Apart from price, the platforms are neither here nor there in my opinion, so if you’re more short term orientated with a higher number of trades you probably would choose a cheaper option. If you’re trading longer term or more infrequently, then really any online broker will suffice. For our longer term strategies we use SelfWealth. They are a well priced Australian-based broker and currently have an offer to claim 10 free trades.