Selecting a Broker

In today's internet enabled market, there is no reason to go for the so calledBig Name "Full Service Brokers". These have been labelled as "Full Price Brokers" and justifiably so, since they tout their "research" and "advice" and make those services justify the high fees and commissions they charge per trade.

These big names include Paine Webber, Merrill Lynch, Charles Schwab, Prudential, Salomon Smith Barney and many more.

One thing to note: All Broker make money when you trade and not when youmake profits. This applies to both Full Service and Discount brokers. Therefore, there is conflict of interest here, in that the interest of the broker that you trade often and he gets the commission. Whether you lose or gain, it makes nodifference (nor responsibility/liability) for the broker.

Enter the Internet!

The internet has changed the brokerage business in two main ways:

  • Availability of Information
    Witness this site and many others! If the internet did not exist, or was not widely available on a global basis, you would not have been reading this!
    We have listed for you many sites where you can do the stock research yourself (after learning the basics, of course).
    Keep in mind that you now have as much information (and maybe more) than a Full Service Broker staff employee!
  • Birth of Discount Internet Brokerage
    The other way that the internet has affected the investing business, is that you now have tens of discount brokers offering trades for as little as 7-12 US$ per trade, as opposed to the 30-50 US$ of the full service firms.

Selecting the right broker is very important! Do not let Cost Per Trade be your only criterion for selecting the broker. Ask your friends, familyand collegaues what they use, and what problems (if any) did they face withthe brokers.
Here are other things to look for in CNET's E-Trading Nightmares.

 

Conventional Discount Stock Brokers

Islamic Stock Brokers

The following companies offer Islamic brokerage services:

  • Fyshe Crestar offer islamic brokerage service in the UK, according to this BBC article.
    They offer Shari’ah Compliant Wealth Management. Offering Institutions
    and Private Clients direct access to the stockmarkets of the world in a
    Shari’ah compliant framework. But now they are bankrupt

The following list is for companies that used to have an Islamic brokerage division, but at present, they have ceased operation.

If you know of some who do, please let us know.

  • CSFBDirect Middle East
    You may want a broker closer to home. So, if you live in the Arab region, this well known company offers all the conventional brokerage services, and in addtion, have an Islamic account where customers get no interest on their cash account balances, cannot trade on margin, and are given free access to Islamiq Islamic stock filter. Islamiq has ceased to operate and CSFB direct brokerage business has been purchased by E-trade some time back.
  • iHilal
    This company used to provide stock trading and an Islamic Stock Filter, based on the Dow Jones Islamic Markets stock screening process.
  • TradeIslamiq
    Used to provide stock trading for customers based in the Middle East, via CSFBdirectME (see above). It is no longer in operation.