Dos and Don'ts of Managing a Brokerage Account

Managing a brokerage account is a substantial financial, business and fiduciary responsibility in the case of non-self directed accounts and an important monetary task when self-directed. The brokerage account, your financial strategy, account services and account management regulations determine what should and shouldn't be done to 1) protect against liability, 2) maintain a proper client and broker relationship, and 3) appropriately manage assets. The 'do's' and 'don'ts' mentioned below provide a broad guideline that may assist with the management of a brokerage account.

Suggested Brokerage Account Do's:

• Be aware of risks
• Pro-actively review assets and their management
• Understand the advantages and disadvantages of services
• Know what is required of you and what you are responsible for

Suggested Brokerage Account Don'ts:

• Invest what you can't afford to invest
• Presume you know everything about an investment
• Renege on a margin call or obligations
• Mismanage funds through negligence

1. Do know what you are responsible for

The brokerage account itself is indicative of what managing that account involves in terms of products, services, benefits, regulations and risks Your product, the company you work for, and applicable regulation(s) will decree the terms of how the account ought to be managed; becoming very familiar with all three of these directives is imperative to your successfully managing one or more of the following brokerage accounts:

• Broker managed brokerage account

• Self-Directed Brokerage account

• Corporate brokerage account

• 401K or IRA brokerage account

• Offshore brokerage account

2. Do be aware of brokerage account risks:

Being aware of brokerage account risks is not only a good way to ensure your quality as a broker, but also to substantiate your actions as a broker. You, your client and your company will all have specific risk management guidelines or allowances that should be clearly understood.

You as the brokerage account manager are the conduit for decision making, rule comprehension and implementation, client and company goal balancing. Some of the risks self directed, multiple brokerage account managers, and investment firm account managers should consider are listed below. As with applicable regulations for specific types of brokerage accounts, risks to may be more or less relevant depending on what asset(s) are being managed.

• Force of sale risk

• Duration risk

• Currency risk

• Regulatory risk

• Management risk

• Product and market risk

• Margin risk

3. Do understand the advantages and disadvantages of services:

Not all brokerage accounts are created equal both in terms of how much they're worth and what services they offer. Know what you want out of a brokerage account and there's probably a brokerage account that can come close to meeting your expectations within reason. For example, if you want to hold stocks, options, bonds and have a money market account all with a theft protection guarantee there's probably an account that comes close to it. Each account may have differing commissions, investor tools, research, platforms, products, processing times and broker assistance that could either be beneficial or non-beneficial to you depending on how you manage the brokerage account and what you expect from it.

4. Don't invest what you can't afford to invest

Not being able to afford an investment increases force of sale risk. Properly allocating money specifically for investments so those investments have time to appreciate or lose value. Since investments involve greater risk than insured, fixed rate interest bearing accounts, the risk of losing money is real. Not being able to afford loss or time in the case of long-term investments is inadequate.

5. Don't negligently manage the brokerage account

Negligent management of a brokerage account means taking money management; investments, the investing process, and investment know how for granted. By taking these things for granted, concern and respect for the brokerage account, your clients and license if applicable, and the accounts performance wanes. This increases management risk that could negatively impact one or more of the brokerage account, you, your client(s), and your company.

6. Don't presume you know everything there is to know

Managing a brokerage account comes with a lot of information from several different directions. The investment products, the investments, the services, responsibilities, research, process and so forth all collectively comprise a good deal of data for you to process, comprehend, and effectively implement while managing the brokerage account. Presuming you know all there is to know can be detrimental to your performance as a brokerage account manager, and/or the success of your investments.