Eight Steps to Take Before Going for Brokers

— -- When buying a piece of fruit, you know to squeeze it, thump it, poke it and prod it as part of the inspection.

Hiring a broker isn’t that instinctive or physical, but you need to take an approach that’s just as thorough and methodical. You want to construct a reasonable list of factors to examine, particularly regarding the broker’s background, work history and disciplinary record. You should also start off with a heavy dose of skepticism.

The following list should help you decide which broker to hire and which broker to report to the authorities.

You Make the Call

You probably don’t want to hire a broker or a firm just because you are solicited by that individual or firm. “When you get cold-called, someone is hustling you to be a client,” says Ralph Lambiase, director of the securities division for the Connecticut Department of Banking.

Cold-calling is perfectly legal. But if you’re handing money to someone following a phone call or two, you obviously haven’t done the necessary homework. You might be making a hasty decision. Remember: You are the one doing the hiring.

What Do You Want?

Before you even start talking to people and firms, you should know exactly what you want from a broker. If you’re going to be doing all your own research and don’t need any help, you only need execution. In that case, you’d be better off going with a discount brokerage that can give you cheaper commissions.

If you need someone to make recommendations and calm you when your stocks are getting crushed, you’ll need a full-service broker. You will, however, pay more for that handholding.

The Interview Process

You’ll want to talk to several brokers before hiring one. “You should consider interviewing several different professionals,” says Bradley Skolnik, Indiana securities commissioner and president of the North American Securities Administrators Association, the organization of state securities regulators. “Most won’t charge for a consultation.”