Spreading the Risk Over More than One Broker
The other day when I briefly lost my Internet connection, it occurred to me that I didn’t have a plan as to what I should do if I was ever to have a problem contacting with my online brokerage’s trading platform right at the time that I wanted (or needed) to enter or exit a position.
If you sit back and think about it, a failure to connect with your broker’s platform even once could spell disaster – or a brief period of panic and stress at the least – if the timing was bad.
So I called them to find out, for future reference, whether they could advise me on the best procedure to follow.
I asked if it was possible to call and conduct a trade over the phone. And, I followed up, should it not be possible to trade on the website or get through to anybody by phone, was there any other option if I needed to place an urgent trade.
The answer I got back was that they had a mobile trading site that I could use from my smart phone if using the full website was not an option. Plus, they said, I could always contact them on a toll-free number for urgent matters and trading.
The problem with this though is that: 1. If the full website is down, there’s a good chance the mobile site would be down too (given the backend systems are the same), and; 2. If the website is down, the phone lines are likely to be swamped.
When I thought more about it, the only real answer was a second (and perhaps even a third) brokerage account with a different company.
And really, when you think about it, broker platform failure/downtime is only justification for a second account.
You might choose one brokerage because the have lower commissions (always a good idea given that, as Dr. Alexander Elder says, the trading industry kills traders with commissions and slippage)
or because it has better research tools, charts or perhaps advice. Maybe you want to trade foreign markets, or some other investment type that your primary broker can’t help you with, or perhaps your brokerage puts restrictions on certain trades.
I’m far from being an expert, but as far as I know, you can trade and own the same stock in as many brokerage accounts as you want with as many brokerage firms you want. The only other thing to consider, I guess, would be the extra paperwork at tax time.
But, I think it’s definitely worth looking into setting up more than one brokerage account.