Would you give large amounts of money to a stranger you met on the street so that they could buy a vaguely defined product on your behalf, a product that could end up being worth more or less than you paid for it? Would you trust them to manage that money, and any profit you made, for an unspecified period of time, confident that eventually they would give you back all that you were due?

We are rightly careful with our money, but with financial brokers, it’s not just cash that we are entrusting them with. In engaging them to realise our financial goals, we are also entrusting them with our hopes and dreams for the future. The relationship between broker and client is in many ways a very intimate one. Yet in the modern age, it is one usually carried out online and at a distance. How can you be sure of finding a financial broker that you can trust?

Do your research

If you’re considering an online, direct access broker, the first thing you should do is to look them up on independent review sites. See what experts and customers alike have to say about them. This in depth FxPro review [1] is a good example. An expert review will also give you more details about their fees and the assets they specialise in, which will help you to make up your mind.

With customer review sites, be sure to look at more than one. A rash of negative comments on one site could lead to a low rating, but this could all be down to just one disgruntled user who was unfortunate enough to have a bad experience, or has an axe to grind. If you see similar negative comments across several review sites, however, then this should set alarm bells ringing. The same goes for positive reviews: look at more than one site or forum before you make up your mind.

Check their credentials

A legitimate broker should be able to tell you their qualifications and credentials for representing you, and will be upfront about their membership of, or licensing by, appropriate regulatory bodies. Look for a broker that is a member of the Financial Conduct Authority [2] (FCA), the Securities Investor Protection Corporation (SIPC) or the Financial Industry Regulatory Authority (FINRA). There’s no reason why this information should be hidden away: brokers are aware that such membership lets clients know that they can be trusted, and as such usually display the inf

Is your money protected?

Under FCA rules, client money should always be kept segregated in a separate account from the brokerage company’s own funds. This means that even if the company runs into trouble or is declared insolvent, your money is safe. This doesn’t mean that you won’t lose money on your investments, which can still drop in value to less than you paid for them, but it does mean that your broker can’t use your investment money for other purposes.

Ask questions

Don’t be afraid to ask your broker some straightforward questions, and expect to get equally straightforward answers. Brokers have no fiduciary duty towards their clients, which means that they don’t have to put your financial interests ahead of their own. They are only expected to make suitable recommendations – a subtle difference that leaves much open to interpretation.

Most online brokers are discount or direct access brokers whose services don’t include financial advice. They simply carry out your instructions and as such take no responsibility for whether your investments succeed or fail [2]. Most brokers make their money through a fee or commission on each transaction, meaning that it doesn’t so much matter to them whether you make or lose money, so long as you make a transaction. The worst thing for them is a client who is inactive, and some charge an inactivity fee for this reason. This isn’t an untrustworthy practice, but it may be a hidden fee that you’re unaware of.

Trust and transparency are extremely important when choosing a broker. Most are above board and trustworthy but remember that they are all in business to make money for themselves. Avoid those that are unlicensed, charge excessive fees, or have a reputation for withholding their clients’ money. At the same time, if brokers don’t charge a commission or have unusually low fees, make sure that you find out exactly how they make their money before going with them. A little research goes a long way and can save you a lot of trouble further down the line.