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Learn the difference between brokers and investment advisers

How involved in upfront research your company wants to be will determine whether it uses a broker or investment adviser. A broker dealer will review company strategy, complete requested transactions and turn the management of the portfolio over to your company's staff. An investment adviser has a fiduciary responsibility to continue to oversee the investment.

I recommend: To understand the distinctions between brokerage dealers and investment advisers, review the information at OverRegd. It provides specific definitions and includes information on legal obligations. See InvestorWords.com for a simple definition of broker dealer and related terms. Use the guide at the bottom of the page to find the definitions of other words.

Find explanations of key investment brokerage terms

Your business can invest in the market in a number of ways. It can buy shares of stock or mutual funds, take out options or purchase futures. Or any combination of these. Buying a share of stock invests your company's money directly in a specific company, while a mutual fund bundles your money with money from other investors. Buying an option gives you the right to buy or sell holdings at a specific price at a given time. Buying futures also guarantees prices based on time.

I recommend: Investopedia has a complete glossary of terms related to brokerage companies and the stock market. Scan the glossary at TheStreet.com for information about online brokerage firms and the complete array of investment terms.

Review information about the regulation of stock brokerage firms

Transactions and client relationships with brokerage companies are regulated. An excellent source for understanding key terms related to brokers and the laws that apply to them are regulatory agencies.

I recommend: Check the comprehensive glossary at FINRA (Financial Industry Regulatory Authority). It contains hundreds of terms related to stock brokerage firms. Study the information at Seclaw.com. It gives practical explanations for the key terms related to brokerage houses.

Helpful advice for making the most of this Guide

• •  Taking a course is perhaps the best way to develop a working knowledge of key terms about investment brokerage. Your staff can find courses online, at local colleges or through brokerage firms.

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Determine whether your needs would best be served by a brokerage house or an investment adviser

When a broker dealer makes recommendations for a client, he generally charges a transaction fee for the security that is bought or sold and is concerned that the investment is suitable for the client. When an investment adviser provides advice, he generally doesn't charge a fee on a transaction basis, but often as a percentage of assets, and the investment adviser has a fiduciary responsibility to the client. What does that mean and which one is right for you?

I recommend: Both Overregd.com and the Nebraska State Department of Banking and Finance do a good job of explaining the difference between brokerage dealers and investment advisers and how they are compensated. If you decide that a broker dealer is the best option for you, Kiplinger can help determine whether a full service or an online or discount investment brokerage firm is right for you.

Learn the advantages of online and discount brokerage houses

If you are a self-service kind of person, enjoy researching companies and don't want to pay high transaction fees, an online or discount investment brokerage may be your answer.

I recommend: Kiplinger discusses how online or discount stock brokerage firms can work for you, and they have an online tool that walks you through questions to help you choose from the top brokerage firms. Some well-known online and discount stock brokerage firms include Schwab, Fidelity Investments and E-trade.

Learn the advantages of full-service brokerage houses

If you know you need help with your investment decisions, the full-service brokerage service company may be right you. Also, if you still have not decided whether a broker dealer or investment adviser is right for you, the good news is that many full-service brokerage companies also offer investment adviser services.

I recommend: Kiplinger offers a non-biased article on what full-service brokerage companies can offer. It is a good idea to check the FINRA website to see if a potential independent broker has any regulatory history or issue before investing. Some well know investment brokerage houses include UBS Financial, Morgan Stanley and Merrill Lynch.

Helpful advice for making the most of this Guide

• •  If you are concerned about tax consequences of trading with a broker dealer, you should make sure the investment brokerage firm you choose tracks cost basis for your trades.

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Research stock brokerage firms

There are a myriad of brokerage firms: full-service, discount and online only. All sell a variety of investment products: stocks, bonds, annuities and other investment vehicles. Some are national; others are local. Some are an independent broker; others have dozens of agents.

I recommend: Review the article on Kipplinger.com to get brokerage dealers basics. Knowing the differences between brokerage houses can help your firm make the best choice of brokers. Investing Online and provides detailed information about brokerage houses.

Find brokerage houses to help attain your firm's investment goals

A business that wants a broker who does the research, makes recommendations and finalizes the sale, wants a full-service broker dealer. Commissions at full-service houses reflect the costs of the additional investment services. A business with a financial investment department to provide those services can save significantly with a discount broker dealer.

I recommend: Check the websites of online and discount stock brokerage firms such Scottrade, E*Trade and TD Ameritrade. Compare offers on free transactions, guaranteed low fees or low-cost options trading. If you're still unsure, call them for further information or scan the Internet for additional choices.

Check the professional background of your broker

While not held to the same fiduciary standards as investment advisers, brokers are regulated by federal and state laws as well as groups such as the National Association of Securities Dealers. Take the time to check your brokerage firm's track record with these groups before investing.

I recommend: Use BrokerCheck at FIRNA, the Financial Industry Regulation Authority, to assess the background of your brokerage service. Check state compliance at the NASAA (North American Sectaries Administration) website.

Helpful advice for making the most of this Guide

• •  Most stock brokerage houses are registered as brokers and investment advisers. If you decide your company wants to change its strategy, those firms can accommodate your needs.

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Consider FDIC rules and regulations for brokerage dealers

If a brokerage dealer works on the premises of an FDIC insured institution, the Federal Deposit Insurance Corporation (FDIC) provides specific regulations the brokerage dealer must follow. These regulations can also be stat-specific, depending on the type of financial institution working with the brokerage firm.

I recommend: The Federal Deposit Insurance Corporation provides the rules and regulations for brokerage dealers working on the premises of state-chartered banks. American Banker lists many FDIC regulations being proposed that could affect brokerage dealers working with banks or on the premises of a bank.

Know the federal laws and regulations for stock brokerage firms

There are many federal regulations for stock brokerage firms in the United States. These regulations are meant to keep the brokerage and its clients safe from fraud. The regulations require brokerage firms to register with the Securities and Exchange Commission, be subject to inspections and provide some standard for consumer protection.

I recommend: SEC Law provides a list of the typical rules and regulations with which a brokerage firm must comply. The Securities and Exchange Commission (SEC) provides regulations for registration of a broker-dealer and other requirements for any stock brokerage firms after registration is complete.

Explore international rules and regulations for brokerage dealer companies

International regulations often come into play with brokerage firms when clients hold money or other financial assets in another country. There are many international regulatory agencies that work with brokerage firms in the U.S. to protect countries from money laundering practices.

I recommend: The Committee of European Securities Regulators provides a number of regulations that assist with keeping fair international trading practices. The Financial Action Task Force (FATF) is an international governing body that combines policies from several countries to reduce money laundering practices with its 40+9 recommendations. Its main purpose is to curb financing for terrorist groups and criminal activities.