When Dealing with Stock Brokers, Communication Is Key

Stock brokers take your money and put it to work for you in various markets where, it is hoped, the risk you face results in better returns than safer investments, such as insured bank deposits. Communication with stock brokers can be key to avoiding negative surprises. When dealing with stock brokers, make sure they know your goals for investing and the amount of risk with which you're comfortable. In turn, use good communication not only to understand all costs associated with investing, but to build valuable relationships with your broker and the office manager.

Sharing Goals

Stock brokers do more than simply buy investments, such as stocks or bonds, with your money. Good stock brokers will help you develop a financial plan that is based first on the goals you want to achieve and the time in which you have to achieve them. Unlike insured bank deposits, there are no guarantees with equity investing. Stocks can go up or down. If you need to sell when the stock is worth less than you paid for it, you lose money. However, stocks can go up as well, often outperforming other, less-risky investments. Communicating your goals to your broker along with the time you have to achieve them - goals such as retirement, college savings or a paid-off mortgage - will help the broker know what investments to recommend.

Communicating Risk Tolerance

Since this type of investing often includes more risk, be certain any stock brokers you work with understand your risk tolerance. For example, with low tolerance for risk, it might be too difficult for you to watch the sometimes wide swings in market value of your portfolio from day to day and month to month. Risk-averse investors often sell out when the market drops, which can, in fact, be a good time to buy, as stock prices are depressed. Communicating your risk tolerance to your broker allows that to be factored into a financial plan. If you must have less-risky investment vehicles and you cannot adjust your time horizon to achieve goals, you might have to adjust your goals. Such adjustments by stock brokers can only be made through your clear communication with them.

Knowing Fees

Working with stock brokers almost always involves fees. They earn their money by helping you invest your money. Good communication can help you avoid unpleasant surprises when you see costs and fees reported on your monthly statements.

Talking to the Manager

Stock brokers can change firms. Take the time to communicate with branch managers where you invest to develop relationships with more than one person. Additionally, though no one plans for a relationship with a stock broker to go sour, if it does, communicating with managers can help you have an advocate in the office.

The Value of a Relationship

Stock brokers are busy. They often have large client bases. Particularly in times of high market activity, clients want to talk to their brokers. This is where the value of a relationship developed by good communication comes in. If you have taken the time to communicate well with your broker and to develop a relationship, the chances of you getting phone calls returned and time-sensitive needs met is heightened.

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