3 Red Flags Your Broker Is Putting Profits Above Your Financial Health

Your broker is at war with itself. On one hand, your broker needs to be useful enough that you stick around. On the other hand, your "fee" dollars are the lifeblood on which your stock broker thrives. (Gotta make money somehow, right?)

Sometimes, brokers toe the line of what's OK, putting profits above your financial health. Are you okay with that? I'm not. Not when there are so many brokers to choose from. I can switch, and so can you. So keep an eye out for the following red flags.

1. Hidden or complicated fees

Brokers that charge hidden or complicated fees are red flags. Why the cloak and dagger? It's unnecessary. Give me the rap sheet, and I'll decide for myself whether you deserve my business. Otherwise, I'm paying fees I didn't know existed until they ate up my checking account balance.

Fidelity is a prime example of a broker that charges few fees. Despite being massive and, well, older than dirt, it's transparent. Fees are clear and easy to find on the Fidelity website. Unlike Schwab and Vanguard, Fidelity charges $0 for bank wires, insufficient funds, and other fees.

It probably comes as no surprise that Fidelity graces best-of lists across the internet. Not so sure? You can compare Fidelity to the best online brokers on the web -- click here to see how the transparent trading titan shapes up to other investing platforms.

2. Risky advertising

Stock brokers that push high-risk tools like leveraged accounts or trading products are threatening your financial future. It's one thing to go looking for loans tied to your brokerage account balance. It's another thing to have margin "offered" to you, front and center, every single time you open your app to check your account balance. For Pete's sake.

Leveraged accounts profit brokers, but more often than not, investors lose money. One 2023 study found that investors who use margin accounts perform worse than those who open taxable accounts. Option traders? They do even worse. This, despite leveraged traders paying twice as much attention to their accounts, on average. Leverage is just that risky.

Be careful of brokers that aggressively advertise high-risk accounts without giving you the option to opt-out. I like Robinhood, but I dislike how hard it pushes margin and options trading.

3. Poor customer service

Stock brokers with poor customer service are red flags walking. You definitely don't want to slog through a garbled chat with a customer service rep when you need to withdraw money ASAP, or your app crashes, or you've been charged a fee by mistake.

It's touch-and-go with customer service. Even E*TRADE and Fidelity, which you can call 24/7, get ripped on frequently. For the best experience, prioritize easy access to representatives in the manner you feel most comfortable communicating.

How to get in touch with brokers:

• Over the phone
• Email
• In-app chat
• In-person

I prefer messaging representatives via email or chat, with the option to call if it's complicated. A few brokers, including Charles Schwab, let you meet a representative face to face at a branch.

Who does everything right?

Fidelity is the brokerage name I'd scream if you shoved me against a wall and held a gun to my head. The stock broker has transparent fees, it doesn't aggressively market margin or options, and Fidelity won the 2024 Kiplinger's Reader's Choice awards. Real user feedback is A+.

Many brokers come off a little sketchy. Fee schedules can get really, really long when you can trade multiple investment types and open multiple account types. Brokers can switch up marketing campaigns frequently, and great customer service is the exception, not the rule.

Pick a broker that meets your needs and doesn't compromise where it matters most. For me, that means low fees and high transparency, at the cost of aggressive advertising. It's not perfect, but it works.