(by Julia Jenson)

5. This brings us to perhaps the most important point: your broker’s ethical code. This ephemeral entity has a quantifiable expression which is a history of fines, lawsuits and complaints brought by customers against the brokerage. Merrill Lynch and A.G. Edwards have comparatively clean records. On the other hand, Ameritrade, BrownCo and TD Waterhouse are among the big offenders. You should make sure that the company sells a large number of non-proprietary products and will not defraud you by making you buy the affiliate’s fund. You may never find out your broker is getting extra commissions for selling “house products” or some of the firms whose IPOs the brokerage underwrites. According to Wall Street Journal, American Express used to give brokers a financial incentive to sell AmEx funds rather than competitors although the proprietary funds were in this case behind the industry. It may also help to check whether the firm sends all its stock trades to a wholly owned subsidiary as Charles Schwab does or spreads them across several market makers without having business relationships with any like Muriel Siebert Co. You can easily investigate a particular individual’s career history researching the National Association of Security Dealers’ website or looking up his/her background information in the Central Registration Depository System.

6. Security of your investments is also closely linked to the stability of the firm itself. The general rule of thumb is to view companies with a larger capital as more stable than smaller ventures that tend to go out of business on a fairly regular basis. $5 million or more is probably safe enough, but anyway, it makes sense to check if the brokerage is a participant of the Securities Investor Protection Corporation (SIPC) that will replace up to $500,000 per customer in the event that a brokerage runs out of funds to cover its claims.

7. If you are using an online broker, convenience greatly depends on the quality of the website. This is largely a matter of taste but Fidelity’s website is often applauded as the most helpful while T. Rowe Price’s online presentation seems rather heavy-handed and frustratingly sluggish. You should take note whether the online resources enable you to download your financial data into Quicken or MS Money, almost a standard feature now that some like ShareBuilder still lack. A secure server is a must. Online service also incorporates the risk of miscellaneous glitches and traffic congestions causing delays at the times of heavy trading. Speed of execution is important. Some practice “drop copy trading” where a live broker reviews orders before they are executed, which can also cause delays.

8. Again in case of online brokerages, it is a good idea to check on the customer service. Helpfulness and expertise of the reps are still an issue. Slow e-mail responses and exasperating waits on the phone line can make your investing activity both frustrating and inefficient.

9. The service that usually comes with higher commissions of the full-service brokers and is increasingly offered by their cheaper counterparts is access to in-house research. There are analysts out there who are worth their salt. Buy recommendations of Merrill’s 360 analysts have climbed 30.4% last year, the result surpassed only by A.G. Edwards’ research staff achieving 32%. If you are not financially equipped to handle the impressive commissions that come with that expertise, you can take advantage of the abridged research versions offered by the upgraded discounts like Fidelity and Siebert supplying the customer with findings of Lehman Brothers analysts.

10. Last but not least – you want to check on the banking amenities they offer you just in case you may need them sometime in the future if not now. A cheaper operation such as BrownCo takes a really minimalist course excluding almost all banking frills to keep the costs down, while financial heavyweights like Merrill Lynch and Smith Barney will provide much better options. Remember however that any service level and extra perks cause an extra fee, so it is up to you to decide what your top criteria are when you choose your broker.