Choosing a broker can be a very confusing and sometimes tricky decision to make especially for a first time investor or trader. Thereare numerous factors to consider when choosing a broker, as they form an essential link between the capital market and you.

One of the most important factors when considering a broker is the company’s financial health, as its financial situation is fundamental to your trading capacity. Among some of the key points to look out for are:-

  • It’s paid up capital and shareholders funds.
  • It’s capital adequacy and net tangible assets.
  • Last but not least, the company’s track record of profitability.

In the trading world, speedy, concise and accurate information is the key to success and your broker’s research materials and updates will be one of the most important trading tools you will need. Ensure your broker provides comprehensive research materials, not only on the companies listed on the KLSE but also material on the economic outlook nationally and internationanlly.

Brokers should offer a good product mix encompassing more than just equities but also bonds as well as fixed income securities, to ensure that all your investing needs are taken care of. Most brokers also have an asset management arm, offering a wide range of unit trusts, which can be a convenient way of investing.

A good broker will also ensure its corporate governance and compliance policies are in line with the regulations they have to adhere to. A stockbroking company should have an efficient and effective Board of Directors as well as Audit Committee. The company should also adhere to its in-house standards and best practices rules.

An independent compliance officer is a pre-requisite, and each broker should also have an in-house compliance culture encompassing policies and manuals. This is to ensure that your legal rights are protected.

You should also read the client agreement, which will detail the terms of trading and the rights and liabilities of each party, this is important as each broker will have individual account opening procedures and documentation. Other important terms worth looking at are:-

  • Contra guidelines.
  • Customers limits and permitted exposure.
  • Issuance of monthly statements and daily contract notes, to ensure there is no conflict of interest astaff trading policy.

Although this is not an exhaustive list of pointers, it is hoped that it will provide a step in the right direction when choosing your
broker, which will hopefully leading a long, happy and lucrative future for you in the local equities market.