Time is money. Therefore when trying to choose financial providers to work with when investing, we want to be able to choose advisers and stockbrokers quickly.
This isn’t like buying a house or choosing a school. Financial advisers and stockbrokers are ultimately just intermediaries that help us get from A to B by providing us with a service.
So knowing how to quickly rank these providers to help us reach a decision will help us stop endlessly deliberating, and begin actually investing!
1. Compare stockbrokers and financial advisers by cost
The most financially savvy way to compare and contrast these providers is by looking at the price they will charge you, as a customer, to use their service.
This is no different from weighing up restaurants or mechanics – if they are going to offer a very similar experience, it follows that we will seek to pay the least amount possible.
In the arena of investing, of course, any money we don’t pay for advice or brokerage fees will be available for us to invest directly in the stock market. This will not only give our current balance a little boost, but it’ll pay dividends over the long term as well!
This means that any fees paid, on the other hand, will carry a huge cost. Not only the cash paid but the loss of future income which could have been earned on that amount.
Bear in mind that different providers will offer a very different level of service. Some advisers may be situated in very fancy offices, offer you a free americano coffee on arrival, and treat you like a king or queen. At the other end of the market, some financial advisers may only deal with you over the phone. It’s always worth researching providers to have a good understanding of their relative offerings before actually sorting by price.
2. Compare by Brand
As human beings, we are attracted to well known and reputable brands. These could be names that we see on TV, or that we’re aware have been trading as businesses for over a hundred years.
There’s something quite comfortable about the idea of investing with a company that your great grandfather or even great grandfather may have placed their money at the same point in their lifetime.
That being said, a reputation has its limits. A business may leverage their brand to charge a higher price. Under such circumstances, is this really a net benefit to the investor?
When it comes to retirement, the branding or your brokerage or adviser isn’t going to help you pay for food by itself. This is therefore a secondary criterion at best.
3. Compare by reviews
A modern way to compare these institutions is my review. Online services such as Trustpilot are set up to enable you to clearly identify companies that treat their customers fairly and consistently.
Of course, reviews can sometimes be gamed. Always read reviews with a degree of skepticism. For example, a provider may have encouraged customers that it knew were more favorable about the company, to provide a review, while not offering the same opportunity to others.
This would still mean that each review is a genuine article, written by a real customer, but the careful selection of reviewers means that the overall picture may not be entirely reflective of each customer’s experience.
4. Compare by popularity
It’s a lazy but brutally effective way to compare providers – look at which firms are the most popular.
The advantage of this method if you’re effectively riding on the collective wisdom of the market. Whichever stockbroker or financial adviser has attracted and retained the most loyal customer must be doing something right! Their price and service proposition must clearly be compelling.
However – be wary that investors and clients are quite disinclined to leave their provider even if their relationship sours. Stockbrokers will charge a client a fee per investment sold when they close their account, meaning it can often cost £500 or more to change stockbrokers.
In this type of market, the leading stockbroker might be simply the firm with the best marketing. The penalties for leaving may prevent people from freely changing their minds and moving their money elsewhere at a later date.