If you'd like to invest in ASX shares, or any shares for that matter, you'll need a brokerage account first. In years gone by, this meant phoning up a brokerage agency and getting a broker assigned to you. You would then pay them far too much in fees and they would recommend stocks to buy and sell, and do so on your behalf.
Fast forward to 2023 and it's a whole new world. Most investors use an online broker these days. Fees have never been cheaper, and the range of investments we can access has never been wider.
However, that doesn't mean that all brokerage platforms offer peerless services.
Too often, investors are still being asked to accept substandard brokerage services. So let's talk about some red flags that you might come across in your search for a top-notch broker.
3 red flags to watch out for when choosing a brokerage account
Check the fees of your brokerage account
This one is probably the most important factor you can assess a broker on. Brokerage costs may seem mall. But if you make dozens of trades every year, they can add up fast. These costs steal from your pocket, so you want to make sure they are as small as possible. It is still not uncommon to see ASX brokers charge upwards of $20 for a single trade. Others offer brokerage as cheap as $3 a trade or even cheaper.
Now, if you only make one or two trades a year, and you find comfort in using one of the big ASX banks as your broker, then, by all means, stay the course. But don't pay too much in fees if you don't get something in return.
International shares
In our modern age, you can buy shares listed on stock exchanges all over the world. Most brokerage platforms now offer access to the US markets, if you wanted to buy shares in the likes of Apple, Amazon or NVIDIA. But if you're an investor who wants to explore the markets of Hong Kong, the United Kingdom, Canada or Japan, it can be difficult to find a service that will cater for these needs.
And it's worth mentioning fees again. Some brokers will charge large brokerage fees for buying international shares. And some will charge you a hefty commission on changing your Australian dollars into the currency of whatever country your share belongs to. Some will even do both. So make sure you're not getting fleeced on fees here either.
Peace of mind
Brokers should be as safe as a bank. After all, you might get to the end of your working life with more cash in the share market than in your bank account, if you're lucky. So it's important to feel like your shares are being housed safely and securely. Most ASX brokers here in Australia are highly regulated, and you should be protected from the firm going bankrupt.
But that doesn't mean you shouldn't be vigilant. So look out for things like individual CHESS HIN numbers and government accreditation. You don't want to go with Johnny Smith who is offering free brokerage but is running his brokerage platform out of the basement.
