How to pick the right brokerage firm for you

September 20th, 2021 by D.C. Poc

If you search for a “buy stocks” or “open a Roth IRA” on the internet, you’ll find that there are a couple less than a million brokerages out there. Literally, there are a TON! Rather than having you start fresh in your search, we’ll try to give you some direction.

What does a broker do?

In short, a broker provides you the opportunity to open investment accounts. These accounts typically include IRAs and Roth IRAs, Health Savings Accounts (HSAs), taxable brokerage accounts, etc. Additionally, you can rollover existing eligible workplace plans to these brokers once you leave your employer. Inside of these accounts, you’ll have investments. These are things like stocks, bonds, Exchange Traded Funds (ETFs), and mutual funds. Don’t confuse your “accounts” with your “investments”, which are held within the account.

What are their differences

There can be significant differences between brokers. These differences typically come in the form of investment offerings, fees, customer service, and technology. Let’s elaborate a little on these.

  • Investment offerings - some brokerages won’t allow you to access certain types of investments. If you’re looking for something specific like options trading, you should ensure the firm you choose offers the service.
  • Fees - these can range from very tame to absolutely horrible. Firms that typically have financial advisors in small offices all over the U.S. are the worst in terms of fees. Your large self-directed brokers have lower fees, and in turn, you’ll have complete control over your account (this is the Wealthy Idiots way!)
  • Customer service - as with anything else on earth, customer service varies depending on the company. Ensure you read some good reviews to figure out if the company is a good fit for you. Maybe your preference is to only chat with customer service - you should ensure this is offered prior to choosing a firm.
  • Technology - this one is huge for me. I want the website and app to be easy-to-use. If it’s not, I’m 100% out. Some newer companies are revolutionizing technology through their use of “robo advisor” technology. They can automatically do things like tax-loss harvest so you don’t have to.

Top picks from the Wealthy Idiots

  1. Fidelity. They are a huge brokerage firm in the U.S. They offer virtually every traditional investment you could want, with low fees, and great customer service. Oh yeah, their website and app is awesome, too. Which is why I chose them. AJ Sheff is working on joining Fidelity right now!
  2. Schwab. Charles Schwab is also a huge investment firm who recently bought TD Ameritrade. They specialize in all of your typical accounts such as IRAs and brokerage accounts. They also have good tech and attentive customer service.
  3. Vanguard. They are the absolute leader in mutual funds and their late founder, John C. Bogle, was the pioneer of index funds. Today, they still offer the same time-proven mutual funds and index funds as well as a slew of ETFs that are available for purchase at almost every brokerage (I hold VTI at Fidelity). These funds are all available at a super-low cost directly to the consumer!
  4. A ton of other brokerages. There are a lot of players in the game. Just to name a few - ETrade, Betterment, Interactive Brokers, and WeBull. Just make sure you use due diligence to select the right firm for you. Some of these are robo advisors, which is a pretty new concept for retail investors.

What to do now?

For the love of God, open a Roth IRA! If you’ve been reading any of our articles at all, you should know by now that we are huge proponents of the Roth IRA, i.e. the best retirement account. Literally anyone can open it (some may have to use the backdoor Roth IRA method), and it grows tax-free and is withdrawn tax-free as well. Open this account today and you can fund it with $6,000 for 2021 and then another $6,000 for 2022 in January. That’s $12k in tax-advantaged investing space!

Once you’ve done this, there are a myriad of other ways to save. You can start a taxable brokerage account where you house your emergency fund, open a 529 Plan to help with your kids' college fund (make sure you check your state first, as they may offer an even more tax-advantaged plan for you), or move some money from an old 401(k) to a rollover IRA. Regardless, research these brokers and pick the best one for you.

D.C. Poc
Co-founder of The Wealthy Idiots, Index Fund Investor, Real Estate Investor

D.C. joined the Marine Corps right out of high school. When he left active duty, after 5 years of service, he quickly earned a bachelors degree and an MBA. He got his first private sector job at a modest salary and quickly worked his way up through promotions. Once he started making decent money ($38k at the time) he quickly realized he needed to learn how to save to secure his future. After nearly ten years of research, he wants to share his knowledge and financial best practices so more people can become Wealthy Idiots!

Disclaimer: The Wealthy Idiots is not a financial advisor and nothing on this site is intended to be used as financial advice. This site operates as a generator of ideas, which sparks financial curiosity and leads to growth in financial knowledge and understanding. If you need specific advice, it is recommended that you speak with an estate attorney, fee-only financial advisor, tax consultant, etc., depending on the area of expertise your question requires.
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