Investing or trading through an online broker is now easy and generally the commissions/fees are very reasonable. The hard part is actually choosing an online broker, from the over-whelming selection available, that’s right for you.
Below is a list of eight critical factors to consider when comparing and/or choosing an online broker.
These tips apply to both investors and the active trader looking for the best online stock broker or Australian CFD & Forex brokers.
Browse by Category: Click any of the links below to jump to each category.
Licensing and Client Funds
Trading Platform Ease of Use
Commissions and Fees
Opening Balance and Minimum Deposit
Ability to Place Phone Trades
Reporting and Statements
Additional Features and Tools
The “Bottom Line”
To check an AFS licence holder’s company name and AFS licence number it’s best to use the ASIC Connect Professional Registers search facility and choose the Australian Financial Services Licensee register option. This is an excellent free search to check details on any financial services organisation, or financial advice providers you may be considering.
This search facility is not just for those comparing online brokers either. As shown below it also provides searches on investment advisors, credit licensee, authorised representatives, etc and you can filter your search results by choosing the status (current, suspended, or ceased) of the person or organisation.
In addition, it is recommended you also do the free Organisations & Business Names search in the ASIC Registers, as this may reveal more information.
Both the above search facilities are free and easy to perform by following the links above. You will need the brokers ASFL number for the Australian Financial Services Licensee search and the brokers ACN number for the Organisations & Business Names search. We provide these two numbers in every single review on this web site to make it even easier for you to confirm critical details and find a reputable broker that suits your trading or investing needs.
Also confirm the bank and location where your funds will be held, in addition to the account structure (eg fully segregated accounts, etc). This information can often be obtained via the brokers web site or phoning them, and must be available in the brokers Product Disclosure Statement (PDS).
If you’re considering a particular online broker, give their customer service or help desk number a call and ask a few questions. Even if you already know the answers to the questions, it’s always good to confirm the answer and by calling them, you can get a feel for the speed of response (do you get through to someone relatively quickly or are you left on hold for 15 minutes waiting?), experience, willingness to help, etc.
While online discount brokers typically don’t provide any investment advice, and reduced services in exchange for lower online share trading commissions, compared to a full-service broker, they should still provide great customer service.
Online trading platforms do not need to have all the “bells and whistles” however the platform must be one you are comfortable with. Many brokers have demo accounts these days where you can not only practice your trading skills, but it is the perfect opportunity to test out the online trading platform and ask questions before you open, or begin placing orders, on a live brokerage account.
Apart from considering the upfront trade execution transaction fees, there is often be more subtle costs worth investigating. For example:
- Are there any ongoing or monthly data fees (In many cases, these will be waived if you perform more than a certain number of trades per month however you need to confirm if this is the case, and if you don’t do the minimum number of trades how much will this cost per month)
- Account inactivity fees
- Statement fees
- Funds withdrawal/transfer fees
- Account closure fees, etc.
On the flip side of the coin, don’t open a specific online brokerage account simply because it offers the lowest commission cost. There are many other factors to consider as this article outlines, and as always you should check the fine print to ensure you understand the true cost for the types and quantity of trades you’d be placing.
This is not said in a negative way, it’s just highlighting another aspect of choosing an online broker which for some may not be a consideration, yet for others may be a key consideration. In addition, it can be incredibly frustrating to spend the time filling out an application form, only to discover you do not have enough money to open a brokerage account with the broker.
The key reason for this is if you were to experience a power outage, or computer/modem equipment failure, on holidays and not able to access your account online, etc. If this were to happen you need to know that you can still easily contact your broker in an alternative way to place, modify any open trade orders, or close out open positions if you can’t actually access your brokerage account via their normal online broker trading platform.
Try to obtain a sample report and confirm how easy it is to understand and obtain the specific information you require from your reports. All brokers have them however it’s surprising at how difficult some can be to read or obtain. Again, it’s all about finding a broker that you are comfortable with and meets all of your needs.
Investment or Technical Reports / Fundamental Data – If your trading style requires access to specific fundamental data, company reports, trade setup or share analysis type reports, then this may be a consideration to see if your required reports or data will be available through your prospective online broker.
Once you’ve compiled your feature requirements list, start evaluating some brokers and cross them off if they don’t meet the mandatory features you’ve highlighted. You might know of some broker names you already wish to consider first, have been recommended to review, or you have found on a trusted broker comparison web site, such as our Online Brokers Australia comparison and review pages.