Investment Discount Broker - How To Find The Right One

Do you sometimes feel you are paying too much for your investment products?  You may feel there is nothing you can do about it.  However there is one route you can take to save money on your investments and that is to use an investment discount broker.  This is something your investment fund provider may well not have told you!

An investment discount broker service means that instead of buying the fund directly from the provider, when you have to pay a fee of at around 5%, you buy from an “execution only” broker service.  There are actually two kinds of execution only services – that is, services that provide no advice but simply carry out the transaction. One is the fund supermarket, which enables you to do all your purchasing online.  However, if you are uncomfortable doing this, you can still use an investment discount broker, who will rebate all or most of the initial fee.

If investing online is important to you then make sure the discount broker you choose has good online facilities. They need to provide you with the fund manager choice that you need so you can have access to a large number of different investment funds. Two of the biggest online fund supermarkets are Cofunds and Fidelity FundsNetwork.

But how do you know how to choose an investment discount broker?  The discount broker market has become more competitive in recent years, so it’s worth shopping around to find those offering the best service.

• Every investment discount broker will rebate all or most of the initial charge. However, some will also discount a portion of your annual management charge, so you may pay 1% to 1.5% instead of 1.75%.  So find out about this before choosing.

• An investment discount broker won’t provide personal advice tailored to your own situation.  However, some discount brokers appoint their own research professionals to monitor individual funds, so you can be offered a short list of the most promising funds to choose from.

• A good investment discount broker will also provide regular communication in some form, such as a newsletter.  The broker may also send out e-mail alerts if there is any change in the fund that could affect you.  Again, find out about this in advance.

An investment discount broker is probably not for you if you are inexperienced, or lack confidence in your ability to select the right investment fund.  But if you are ready to save money by going it alone, the investment discount broker is your ideal route.  Just remember that all discount brokers are not the same – there is quite a difference in the levels of service they provide.  So do shop around to find the one that offers the best value.