Your money: More to consider before picking a broker

Q How do I find a broker? (Part 2.)

A Last week, I explained the difference between full-service brokers and low-commission and Internet trading. Now I'd like to go into more detail.

If you choose to become the customer of a full-service broker, it's critical to interview several. I'd talk with respected colleagues and neighbors to see if they work with someone they can recommend.

Check out their performance records. What is their financial background and education? Do they handle clients with your income and assets? Get references, and contact them.

And head to this Web page offered by the Securities and Exchange Commission, www.sec.gov/investor/brokers.htm. It gives you all the links you need to find out whether your potential broker has behaved ethically over the years -- or not.

A couple of additional thoughts: Make sure what you need is a broker and not a financial planner. A financial planner should work with you on all your assets and liabilities, not just your investment portfolio.

If that's what you want, I'd do some research at the Financial Planning Association www.fpanet.org and investigate the possibility of working with a Certified Financial Planner (CFP). It's a designation that the planner has had a rigorous training, passed a minimum competency exam, and keeps up with the required continuing education.

If it is a broker you're looking for, a good one can help you build up an investment portfolio over time. What the broker can't do, despite being linked to an army of research analysts and computer terminals, is consistently beat the market. This is a case where the cliché is right: If it were easy to beat the market, everyone would be rich. I wouldn't put my standard of living in retirement, my children's college education, and other long-term goals at risk to a broker's (or her firm's) stock-picking prowess.

And if you do go with a broker, it's important to have an investment philosophy and well-articulated goals -- no different from the do-it-yourselfer. That way, your broker understands the kind of service and advice you need, and you can develop a fruitful relationship.

Chris Farrell is economics editor for American Public Media's weekly "Marketplace Money" program on public radio. He lives in St. Paul. Send questions to: cfarrell@mpr.org, or to kaching@startribune.com, and put "Your Money" in the subject line.