Negotiating a Stock Broker Commission

Stock broker commission is one of the biggest variables that most investors have to learn to deal with. When you are working with a stock broker, you could potentially try to negotiate their commission. Here are a few things to consider about negotiating a stock broker commission.

Benefits of Negotiation

Many people do not realize that you can negotiate with some stock brokers. While some of them will not be willing to negotiate with you, others will potentially be willing to accommodate you. When you can successfully negotiate a lower commission, you are going to be able to cut down on your transaction costs. If you trade frequently in the stock market, this is going to increase your profitability. You may be able to negotiate a deal that no other traders with your broker can get. Therefore, it always pays to at least try to negotiate a lower commission with your stock broker. Before you start negotiating, you need to consider what you want in terms of service. If you are asking for a lower commission, you need to be prepared to receive less service from a broker.

Broker Comparisons

One way that you could potentially negotiate with a stock broker is by comparing them to other brokers that you have worked with. Stock brokers are very competitive and they want to attract as many clients as possible. Because of this, if you shop around, you could potentially find a good deal on commissions. When you get information from a broker, you can use this information to negotiate with a different broker. You can show the broker that you want to work with that other brokers are charging less for commission. Many times, the broker will lower their commission schedule in order to get your business.

Performance-Based

Another way that you could potentially negotiate your commissions is to base them on performance. Stock brokers typically want to tell you all about how great they are at trading in the market. If this is the case, you need to ask them to back up these claims. Ask them to base their commission on the performance of the investments that they choose. If they do well for you, they are going to be able to make more money. If they do not choose the right investments, their commission is going to suffer. Good brokers are going to be willing to do this because they know that they can choose the right investments. If you are working with someone that does not know what they are doing, they may be leery of choosing this commission structure.

Volume

Another way that you can lower your commissions is to talk about volume. When you are working with a new broker, you need to let them know exactly how much you plan on trading on a regular basis. If you are going to be trading a large volume of stocks, then they can most likely afford to give you a discount on your commissions that you pay to them. The broker can make up for the lower price per trade by getting a lot more trades from you.

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