Is a Traditional Broker Best for Me

According to the Pew Internet & American Life Project (www.pewinternet. org), one out of every ten Internet users has bought or sold stocks online. Specifically, a recent study indicates that since September 2002, about 12 percent of all Internet users have bought or sold stocks online. This represents a 40 percent growth from 10 million Americans who reported they had completed online stock trades as of March 2000 to 14 million Americans who reported completing stock trades as of September 2002. The downturn of the stock market in recent years has likely had an impact on the conservative growth of online trading. In other words, the growth of online investing was likely dampened by low (or in some cases nonexistent) stock returns.

Investors who don’t use the Internet generally want professional, customized advice; they’re looking for a brokerage that provides excellent recommendations and has the ability to handle complex financial services for real estate assets or investments in private companies or partnerships. In other words, these investors want a traditional broker that makes his or her living by being a financial consultant and knowing an investor’s risk-tolerance level.

Following are some of the offerings you can expect to find in a traditional brokerage:

Recommendations and advice: Broker advice is supposed to be unbiased and geared toward your best interests. However, brokers make money from sales commissions, so the more you buy or sell, the more money they make.

Quality service: The quality of service for both large and small account holders can be the same. In other words, both types of customers can get red carpet treatment or, in some cases, can be quickly forgotten.

Help with calculating your taxes: As a value-added service, some traditional brokers will determine the amount of taxes owed by the investor.

First choice in IPO offerings: Traditional brokerages can let their customers know about new initial public offerings (IPOs) so that customers can get in on the ground floor (the first stage) of a potential investment opportunity.

Access to other investment options: Many affluent investors need help managing their real estate assets and investments in private companies or partnerships.

A little peace of mind: Traditional brokers are paid to watch for changes in the market so that you don’t have to. Additionally, if something goes wrong, the investor can always blame it on a bad broker recommendation.

Branch offices: Some investors need to visit their brokers face to face to feel comfortable. Having a branch office in the neighborhood can encourage investor trust.