Five signs it’s time to change your online investment broker

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Paying account transfer fees, filling out online requests, learning a new trading platform – none of this can be taken as an investor’s idea of ​​having a good time. And yet, jumping through these hoops to change your online brokerage account may be worth it.

In some cases, making a change can save you money. In others, it could increase returns or give you access to high services, such as trading software, more investor education opportunities or a wider range of investment choices.

Here are five signs that it might be time to change your online broker:

1. You pay an inactivity fee

Some online brokerage fees, like trade commissions, are unavoidable. Inactivity fees are not included.

If your broker fined you for not trading enough or maintaining a minimum balance, it’s time to get off the ship. There are many brokers that do not have balance or trade requirements, including highly rated options such as TD Ameritrade and Home Options. These brokers are best suited for occasional investors who do not wish to commit to executing a certain number of trades per month, quarter or year.

2. You will offset the transfer costs with reduced commissions.

You will pay a fee to transfer your account, typically $ 50 to $ 75. But if the move will lower your trading commissions, it’s worth it.

Here’s where you need to do a little simple math: Divide the cost of the transfer fee by the savings per transaction. Suppose you switch from a broker that charges $ 9.95 per trade to one that charges $ 4.95, saving you $ 5 per trade. Even though it costs $ 50 to complete the account transfer, you will recoup those fees with just 10 transactions.

If you don’t trade frequently, your account transfer may not be worth the cost. But be sure to explore broker promotions (more on these next). Some brokers, like Scottrade, offer to reimburse your transfer fees.

3. You can take advantage of a promotion

The field of online brokers is increasingly crowded and competitive. This means that promotions are common, ranging from cash bonuses and commission-free transactions to the aforementioned offers to subsidize transfer fees.

The catch: Often, but not always, you have to deposit a certain amount to qualify. If you can exceed this threshold and the promotion will either save you a significant amount of commissions or fill your account with a little extra cash, it may be worth changing. Just make sure the new broker matches your needs. You don’t want to save a bit in the short term if you end up spending more or are faced with limited functionality in the long term.

4. You don’t manage your investments

Unless you are invested in a target date funds which rebalances automatically, you should familiarize yourself with your investment account. This doesn’t necessarily mean that you trade frequently, if that is not your investing style, but it does mean checking back regularly to make sure your asset allocation is online and your wallet is follow-up with the rest of the market.

If you don’t, you might be better off transferring your online brokerage account to a robot advisor. A robot advisor uses computer algorithms to manage your investments for you, for management fees of around a quarter of a percent. You’ll also need to incur some capital expenditure, but these services mostly use low-cost exchange-traded funds. All told, you’ll likely pay less than 0.50% per year for the service, which is significantly less than what a financial advisor would charge.

5. Your broker’s services do not meet your needs

Some brokers charge very low commissions but offer little support to investors: limited or no educational offerings, minimal tools, non-existent or poor trading platforms. Others charge extra but provide corresponding services. TD Ameritrade, for example, charges $ 9.95 per trade, but gives investors access to some of the best trading platforms available, completely free.

If commissions are the most important to you, your account should be with the first one. If you need or want educational support, an improved trading platform and advanced tools, it may be worth switching to the latter, especially if these features improve your returns.

You don’t want to pay for services you don’t use, and you don’t want the limited functionality of a broker to hold you back either. Carefully Consider your investment needs and choose the cheapest broker who respects them.

This article first appeared in NerdWallet.


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