Brokerage accounts look alike on the sign-up page. The differences show up later: in the fee schedule, in the rate paid on cash you have not invested, in how hard it is to leave, and in the firm's regulatory record. This guide turns those differences into a checklist, works through an example of what a low cash rate costs, and explains what to verify on FINRA BrokerCheck and SIPC's member list before you send money. It names no firms, because the aim is to know what to check whichever firms you compare. Once you have chosen, how to buy stocks walks through the application and a first trade, and the stocks hub covers the wider basics.
What should you look for in a brokerage account?
Look for the account types you need, low fees, a fair rate on idle cash, and a firm whose registration and SIPC membership you can verify. The checklist covers the nine points that differ most between firms, and the sections after it work through the ones that need numbers or a lookup.
Nine things to check before opening a brokerage account
- Account types. Individual and joint taxable accounts, traditional and Roth IRAs and, if you need them, custodial, trust or HSA accounts. Check that margin and options trading are add-ons you request rather than defaults.
- Trading fees. Commissions on stocks and ETFs, the per-contract charge on options, fees for trades placed by phone and any charge for mutual funds outside the firm's no-fee list.
- Account fees. Transfer-out, inactivity, low-balance, paper statement, wire and account-closing fees, all of which appear on the fee schedule.
- Cash sweep rate. What the default sweep pays at your expected balance, and whether you can pick a money market fund instead. Cash sweep accounts explained shows how the programs work.
- Fractional shares. Whether you can buy by the dollar, which stocks and funds qualify, and whether those orders trade only in regular hours. Fractional shares covers the trade-offs.
- Research and tools. Real-time quotes, screeners, fund comparisons, order previews with estimated costs, and tax-lot selection when you sell.
- SIPC membership. Confirm the firm on SIPC's member list. SIPC protects customers of a failed member firm up to $500,000 per customer, including up to $250,000 in cash, but not against investment losses.
- Customer service. Phone hours, how quickly a person answers on busy trading days, and how complaints are escalated.
- Regulatory record. The firm's FINRA BrokerCheck report and its Form CRS relationship summary.
Which account types should a broker offer?
At a minimum, a taxable individual account and an IRA; many households also want a joint account, and parents may want a custodial account for a child. A firm that offers both traditional and Roth IRAs lets you choose the tax treatment that suits you, which Roth vs traditional IRA explains, and one that accepts rollovers lets you gather old workplace plans such as a 401(k) in one place.
Margin and options are permissions layered on top of an account, not account types. A firm approves them based on what you report about income, net worth and experience, and some applications switch margin on unless you decline it. If you never plan to borrow, a cash account removes the chance of an accidental loan; margin accounts explained covers what borrowing involves. For frequent traders, the pattern day trader requirement was replaced by intraday margin standards from June 4, 2026, with firms allowed to phase them in until October 20, 2027, so the day-trading limits on a margin account now depend on when and how each firm adopts the new standards.
Living outside the US changes both the rules and the firms that will accept you; opening a US brokerage account as a nonresident covers that case.
Which brokerage fees matter most?
Commissions on online stock trades are often zero, so compare the other charges: options contract fees, transfer-out, inactivity, paper and wire fees, and broker-assisted trade fees. Investor.gov's list of charges to ask about runs from commissions and markups to maintenance, inactivity, closing, margin interest, wire and transfer fees. The table shows when each one applies and what to ask.
| Fee | When it is charged | What to ask |
|---|---|---|
| Stock and ETF commission | Each online trade, at firms that charge one | Is it zero for every listed stock and ETF, or only some? |
| Broker-assisted trade | Orders placed by phone or through a representative | How much more does a phone order cost? |
| Options contract fee | Each options contract bought or sold | What is the per-contract charge, and is there a base fee per trade? |
| Mutual fund transaction fee | Funds bought outside the firm's no-fee list | Which funds are free to buy, and what do the others cost? |
| Transfer-out fee | Moving the account to another firm | Does it apply to partial transfers as well as full ones? |
| Inactivity or low-balance fee | Accounts with few trades or a small balance | What balance or activity avoids it? |
| Paper statements and confirmations | Each mailing, at some firms | Is electronic delivery free? |
| Outgoing wire | Each wire you send | What do domestic and international wires cost? |
| Margin interest | Money borrowed, charged daily | What rate applies at your loan size? |
Regulatory fees on sales, mainly the SEC's Section 31 fee and FINRA's trading activity fee, are passed through to you by every firm; the cost walk-through on a $1,000 trade shows they come to pennies. The price your orders get matters more than either. Firms that charge no commission are often paid by the market makers that execute their customers' orders, which how the stock market works explains.
Two public reports help you judge that trade-off. Brokers publish quarterly Rule 606 reports showing where they send customer orders and what they are paid for them. Since August 1, 2026, brokers that introduce or carry 100,000 or more customer accounts must also collect data for monthly Rule 605 execution-quality reports, including a summary that groups market and marketable limit orders by size, such as $1,000 to $5,000, and separates S&P 500 stocks from the rest. The SEC designed those reports to make execution price and speed comparable across firms.
What should you check on FINRA BrokerCheck?
Search the firm on BrokerCheck, confirm it is registered, then read its disclosures, history and ownership; repeat the search for any individual broker you deal with. BrokerCheck is FINRA's free lookup tool. Its data on brokerage firms and their representatives comes from the Central Registration Depository, the industry's licensing database, and it also covers investment adviser firms from the SEC's adviser registration database. A firm report has five parts:
| Report section | What it shows | What to look for |
|---|---|---|
| Summary | A short overview of the firm and its background | Whether the firm is currently registered with FINRA |
| Firm profile | Where and when the firm was set up, and who owns or controls it | A parent company you recognize, or owners you cannot trace |
| Firm history | Mergers, acquisitions and name changes | Frequent name changes, which deserve a closer look |
| Firm operations | Active licenses and registrations, and the types of business it conducts | Registration in your state and the services you plan to use |
| Disclosures | Arbitration awards, disciplinary events and financial matters | Repeated or recent events, and whether any are still pending |
For an individual broker, the report lists every firm where the person has been registered, 10 years of employment history, the exams passed and licenses held, and disclosures such as customer disputes, disciplinary events and certain criminal and financial matters. Some disclosures are pending allegations that have not been proven, so read the detail rather than counting entries. FINRA's Arbitration Awards Online and Disciplinary Actions Online databases hold the full text behind many entries.
Form CRS completes the check. Every SEC-registered broker-dealer and investment adviser serving retail investors must give you this relationship summary when the relationship starts. It covers services, fees, conflicts of interest and legal or disciplinary history, and Investor.gov lets you search for any firm's current version.
How do you confirm a firm is a SIPC member?
Search the firm's exact legal name on SIPC's list of members; nearly every registered broker-dealer must belong by law, but there are exceptions, and look-alike names exist. SIPC's own wording is that all registered brokers or dealers are members by law, with some exceptions. Use the legal name from the firm's BrokerCheck report, since a brand name can differ from the entity that holds your account. If the firm you deal with uses a separate clearing firm to hold customer assets, look up that firm as well.
Membership protects you in one situation: the firm fails and customer cash or securities are missing. SIPC then works to return customer property and can advance up to $500,000 per customer, including up to $250,000 in cash. It does not cover a fall in market value or bad advice, it excludes some products that are not securities, and cash swept to partner banks relies on FDIC insurance instead. SIPC coverage explained goes through the limits and edge cases, and FDIC vs SIPC compares the two programs.
How much can a low cash sweep rate cost you?
On a large idle balance, more than most fees: a 0.05% sweep pays 5 cents a year on $100, while a 4% alternative pays $4. Uninvested cash, whether from deposits, dividends or sale proceeds, flows automatically into the program the firm sets as its default. The SEC notes that the default at many firms is a bank sweep and that bank sweeps often pay less than money market fund sweeps. You can usually move cash out of the default even if the firm enrolled you in it automatically. For context, the Federal Reserve's target range for short-term rates is 3.75% to 4.00%, and the FDIC's national average savings rate is 0.38%.
Worked example: $15,000 waiting in cash for nine months
You sell a fund and leave $15,000 uninvested for nine months, or 0.75 of a year, while you decide what to buy next. The rates are illustrative, and the interest is simple interest so the options compare cleanly.
- Default bank sweep at 0.05%: $15,000 × 0.0005 × 0.75 = $5.63
- Higher sweep tier at 0.50%: $15,000 × 0.005 × 0.75 = $56.25
- Money market fund sweep at 3.60%: $15,000 × 0.036 × 0.75 = $405.00
- Treasury bills yielding 4.00%: $15,000 × 0.04 × 0.75 = $450.00
The gap between the default sweep and the bills is $450.00 − $5.63 = $444.37. A standing cash buffer adds up the same way: $5,000 kept in the account at 0.05% instead of 3.60% gives up $5,000 × 0.0355 = $177.50 a year, or $887.50 over five years.
When you compare firms, ask for the sweep rate at your balance tier, whether a money market fund sweep is available, and whether an asset-based advisory fee applies to cash. The SEC points out that holding cash in an account charged a percentage of its assets can raise the fees you pay. Treasury bills are another way to hold cash inside a brokerage account: how to buy Treasury bills compares the routes, and the T-bill calculator shows what a bill pays.
Do research tools and customer service matter?
They matter less than fees and protection, but they shape daily use, especially when a trade goes wrong or a transfer stalls. A long-term investor needs little: real-time quotes with the bid and ask, a fund screener that shows expense ratios, an order preview with estimated costs, and the option to pick tax lots when selling. Quote pages such as our stocks overview and Apple's page show the core fields any broker's screens should match. Active traders add charting, options analytics and alerts. If a firm lets you open an account before funding it, try the order screens first.
Service matters most at the worst moments: an outage during a volatile session, a deposit that has not arrived, a stuck transfer or a mistake on a confirmation. Check the phone hours, whether a person can be reached throughout the trading day, and how a complaint moves up if the first answer does not resolve it.
What are the risks of choosing the wrong brokerage?
Mostly slow leaks rather than sudden losses: fees, a weak sweep rate and transfer restrictions drain returns, and SIPC's protection has limits if a firm fails.
- Leaving is harder than joining. Under FINRA Rule 11870 the old firm has one business day to validate a transfer and three more to complete it, but open orders are canceled at validation, fractional shares usually have to be sold first, and some securities, such as a firm's own funds, may not transfer at all. Selling in order to move can create a tax bill.
- Margin you did not mean to use. An application that defaults to margin can turn an oversized purchase into a loan with interest.
- Cash above insurance limits. Bank sweeps place cash at partner banks, where FDIC insurance covers $250,000 per depositor, per insured bank, per ownership category, so a large balance, or money you already keep at one of those banks, can exceed the insured amount.
- Conflicts of interest. A firm paid for order flow or for steering cash into an affiliated bank has reasons to favor its own interest, and Form CRS must disclose those conflicts.
- Outages and access. Heavy trading days can strain a broker's systems, so know a backup way to place or cancel an order, such as a phone line.
- Imposters. Fraudsters copy the names and logos of real firms. Reach a firm through the website and phone number on its BrokerCheck report, never through a link in an unsolicited message.