3 red flags Your broker is putting profit above your financial health

Your broker is at war with himself. On the one hand, your broker has to be helpful enough for you to stick around. On the other hand, your “fee” dollars are the lifeblood on which your stock broker thrives. (Gotta make money somehow, right?)

Sometimes brokers toe the line of what’s okay, putting profits ahead of your financial health. Do you agree with this? I’m not. Not when there are so many brokers to choose from. I can change, and so can you. So watch out for the following red flags.

1. Hidden or complicated fees

Brokers charging hidden or complicated commissions are red flags. Why the cloak and dagger? It is useless. Give me your rap sheet and I’ll decide for myself if you deserve my business. Otherwise, I’m paying fees I didn’t know existed until they consumed my checking account balance.

Fidelity is a great example of a broker that charges few commissions. Despite being massive and, well, older than dirt, it is transparent. Fees are clear and easy to find on the Fidelity website. Unlike Schwab and Vanguard, Fidelity charges $0 for wire transfers, insufficient funds and other fees.

It’s probably no surprise that Fidelity enjoys the best listings on the Internet. I’m not so sure? You can compare Loyalty to the best online brokers on the web — click here to see how transparent trading titanium translates into other investment platforms.

2. Risky advertising

Stockbrokers who promote high-risk instruments such as leveraged accounts or trading products threaten your financial future. It’s one thing to look for loans tied to your brokerage account balance. It’s another thing to have a margin “given” to you, front and center, every time open the app to check your account balance. For Pete’s sake.

Leveraged accounts brokers profit, but most of the time investors lose money. A 2023 study found that investors who use margin accounts underperform those who open taxable accounts. Options traders? They are doing even worse. This despite the fact that leveraged traders pay twice just as much attention to their accounts, on average. Leverage is just that risky.

Beware of brokers who aggressively advertise high-risk accounts without giving you the option to opt out. I like Robinhood, but I don’t like how much it pushes margin and options trading.

3. Poor customer service

Stock brokers with poor customer service are red flags. You definitely don’t want to go through a messy chat with a customer service representative when you need to withdraw money ASAP, or your app crashes, or you’ve been charged by mistake.

It is a customer service contact. Even E*TRADE and Fidelity, which you can call 24/7, get ripped off frequently. For the best experience, prioritize easy access to representatives in the way you feel most comfortable communicating.

How to get in touch with brokers:

On the phone
E-mail
Chat in the app
In person

I prefer messages from reps via email or chat, with the option to call if it’s complicated. Several brokers, including Charles Schwab, allow you to meet a representative face-to-face at a branch.

Who does everything right?

Fidelity is the brokerage name I would scream if you pushed me against a wall and held a gun to my head. The stock broker has transparent commissions, does not aggressively trade on margin or options, and Fidelity has won Kiplinger’s Reader’s Choice Awards 2024. Real user feedback is A+.

Many brokers come off as a bit stingy. Fee schedules can get really, really long when you can trade multiple types of investments and open multiple types of accounts. Brokers can change marketing campaigns frequently, and great customer service is the exception, not the rule.

Choose a broker that meets your needs and doesn’t compromise where it matters most. To me, that means low fees and high transparency at the cost of aggressive advertising. It’s not perfect, but it works.