A broker is the gate between your money and the market, and people spend weeks comparing them. Most of that time goes to the wrong questions: which one has the prettiest app, which one a friend uses, which one advertises the lowest headline commission. The questions that matter are fewer and duller. Is the broker regulated and are my assets protected if it fails? What will my own routine cost in total? Does it offer what I intend to buy? This guide takes the six criteria in the order they deserve, explains how brokers actually make money, and ends with a checklist and the signs of a platform you should walk away from.
What a broker does, and what it does not
A broker executes your orders on an exchange and holds the securities you bought in a custody account in your name. A broker does not manage your money, does not pick investments for you and, in the execution-only model most retail investors use, does not give advice. The quality of your decisions comes from you; the broker only determines how safely and how cheaply they get carried out. That is why the choice matters less than beginners fear, and why the few things that do matter are about safety and cost rather than features.
Criterion 1: regulation and the protection of your assets
This criterion is not negotiable. Before you look at anything else, find three things on the broker's website - they are usually in the footer or on a "legal" or "regulation" page.
- The licence. The broker must be authorised by a financial regulator - in the European Union, by the regulator of the member state where it is based, which lets it serve clients across the EU. The licence number should be verifiable in that regulator's public register. A broker that only names an offshore jurisdiction, or no regulator at all, is out.
- Segregation of client assets. Your securities and cash must be held separately from the broker's own balance sheet, so that if the broker goes bankrupt, its creditors cannot touch them. Securities held in your name at a custodian survive the broker's failure; the question is only how long the transfer takes.
- An investor compensation scheme. Every EU-regulated broker is a member of a national scheme that covers clients if the broker fails and assets are missing, up to a limit set by law - the EU minimum is 20,000 euros per client, and some countries set it higher. Note what the scheme covers: the broker's failure, not a fall in the value of your investments.
Criterion 2: the total cost of your own routine
Broker advertising is built around one number - the commission per trade - because it is the one that can be made to look like zero. Your real cost is the sum of several fees, and which one dominates depends entirely on what you do. The table lists the fees to look for.
| Fee | What it is | Who it hits hardest |
|---|---|---|
| Commission | A fixed or percentage fee per executed order. | Frequent traders, buyers of small amounts when the fee is fixed |
| Spread | The gap between the buy and sell price; a wider spread is a hidden cost on every trade. | Everyone, especially on illiquid stocks and "commission-free" platforms |
| Currency conversion | A percentage taken when you buy in a currency other than your account currency. | Monthly savers buying US or global ETFs in a non-dollar account |
| Custody or inactivity fee | A periodic charge for holding the account or for not trading. | Long-term holders who buy and rarely trade |
| Market data and exchange fees | Charges for real-time quotes or for access to certain exchanges. | Investors buying on several European exchanges |
| Deposit and withdrawal | A fee on moving money in or out, sometimes only for certain methods. | Anyone who withdraws regularly |
The method is simple: write down what you will actually do, then price exactly that at each broker you consider. For a monthly saver the sentence is something like "buy one global UCITS ETF for a fixed amount every month, in euros, and hold for ten years". For that routine the commission may be irrelevant and the currency conversion and the custody fee decisive. For someone who buys a dozen individual stocks a year, the spread and the commission matter more.
Criterion 3: markets, instruments and how you can buy them
A broker that does not offer what you intend to buy is the wrong broker no matter what it costs. Four things to check.
- Exchanges. Most beginners need the main US exchanges and one or two large European ones. If you plan to buy a specific company listed only on a smaller exchange, confirm it is available before you open the account.
- UCITS ETFs. Investors in the European Union generally cannot buy ETFs domiciled in the United States through a retail broker because of EU investor-protection rules; the equivalents are UCITS ETFs listed on European exchanges. Any serious EU broker offers them - check that the specific funds you want are on the list.
- Fractional shares. The ability to buy a part of a share lets you invest a fixed amount regardless of the share price. Essential for a monthly saver; irrelevant for someone who buys whole shares of cheaper stocks.
- Savings plans and recurring orders. An automatic purchase on a fixed day each month is what turns a plan into a habit. Not every broker offers it, and some limit it to selected funds.
Criterion 4: tax reporting and account types
Investing creates paperwork. Dividends, sales and in some countries even holding foreign securities have to be declared. A broker based in your own country typically produces a tax report in the format your tax office expects and may withhold tax at source; a foreign broker gives you a transaction history and leaves the rest to you. Neither is wrong, but the difference is hours of work every spring, so weigh it honestly against a lower fee.
Many countries also offer tax-advantaged accounts for long-term or retirement investing, available only through providers registered for them. If such an account exists where you live and you qualify, it is often worth more than any fee difference - check which brokers can open one before you decide. The rules differ from country to country, so verify them with your tax office or an adviser rather than with a broker's marketing page.
Lesson: fees and taxes How fees compound against you over decades and what investors generally have to declare. Read the lessonCriterion 5: the platform, the order types and the support
You will use the app for years, so it should be clear rather than impressive. Three practical tests tell you more than any feature list.
- Can you place a limit order easily? A market order buys at whatever the current price is; a limit order buys only at your price or better. For anything but the most liquid stocks, the limit order is the one to use, and it should be a normal part of the order ticket, not hidden behind an "advanced" switch.
- Is the account statement readable? You should be able to see at a glance what you own, what you paid, what it is worth and what fees you were charged. Opaque statements are a bad sign.
- Does support answer? Write to them with a real question before you deposit. A reply within a working day in your language is the standard to expect; silence tells you what to expect when something goes wrong with your money.
Criterion 6: understand how the broker makes money
Every broker earns money from you somewhere, and knowing where tells you which fees to look for and which incentives the platform has. The common sources are these.
| Source | How it works | What it means for you |
|---|---|---|
| Commissions | A fee per trade. | Transparent; the broker benefits when you trade often. |
| Spreads | The broker or its market maker earns the gap between buy and sell prices. | A "free" trade still costs you the spread; compare quotes with the exchange price. |
| Currency conversion | A margin on exchanging your account currency. | The main cost for savers buying foreign ETFs; look for the percentage. |
| Interest on cash | The broker keeps some or all of the interest on uninvested client cash. | Do not park large cash balances at a broker that pays no interest. |
| Securities lending | The broker lends out shares held for clients to short sellers. | Usually disclosed in the terms; you may be able to opt out. |
| Payment for order flow | A market maker pays the broker to execute its clients' orders, where the law allows it. | Restricted in the EU; where it exists, check execution quality. |
| Leverage and derivatives | Financing charges and spreads on leveraged products. | A platform built around CFDs earns most from clients who trade them - a beginner should buy the shares themselves. |
Which broker for which investor
Among the brokers European retail investors commonly use are eToro, XTB, Trading 212, Degiro and Interactive Brokers, alongside the investment platforms of the major banks. They differ in emphasis: eToro is built around a multi-asset platform with fractional shares and a social layer where investors share their portfolios; XTB and Trading 212 focus on commission-free stock and ETF investing with savings plans; Degiro is a low-cost execution-only broker for European exchanges; Interactive Brokers offers the widest market access and professional tools at the price of a steeper learning curve. Bank platforms tend to cost more per trade but integrate with your bank account and tax paperwork. Fee structures change, so read the current schedule rather than relying on reputation.
| Profile | Prioritise | Can ignore |
|---|---|---|
| Monthly ETF saver | Currency conversion fee, savings plans, fractional shares, no custody fee | Commission per trade, advanced order types, market data |
| Long-term stock picker | Exchange coverage, limit orders, readable statements, tax reporting | Social features, leveraged products |
| Active trader | Commission and spread, execution quality, real-time data, tools | Savings plans |
| Investor near retirement | Regulation, tax-advantaged account, bond and fund access, support quality | Fractional shares, mobile-first design |
The signs of a platform to avoid
Investment fraud mostly arrives dressed as a broker. None of the following is ever part of a legitimate service, and any one of them is reason enough to stop.
- Guaranteed or "fixed" returns on stocks or crypto. Markets guarantee nothing, so a platform that promises a return is lying.
- Someone contacted you first - a call, a message, an advert promising a system - and now urges you to deposit quickly before an opportunity closes.
- An "account manager" who trades for you or asks for remote access to your computer or your banking.
- Deposits only by crypto, gift cards or transfers to a private individual. Regulated brokers take bank transfers into a company account.
- Problems withdrawing. Withdrawals need a "tax" or "fee" paid first, or are delayed indefinitely. A real broker returns your money within days.
- No verifiable licence, a regulator you have never heard of, or a licence number the regulator's register does not recognise.
Opening the account and the first order
Once you have chosen, the process is standard across regulated brokers and takes one to a few days.
- Identity verification. A photo of your ID and usually a proof of address or a short video check. The law requires it, so a broker that skips it is not regulated.
- The appropriateness questionnaire. Questions about your experience and finances. Answer honestly - the result restricts access to complex products, which protects you more than it limits you.
- Funding. A bank transfer from an account in your name. The first one may take a day or two; check whether your broker charges for deposits.
- The first order. Find the instrument by its ISIN rather than its name - several funds share similar names - choose a limit order, enter the amount, confirm. The lesson below walks through the order ticket field by field.
Changing brokers later
The choice is not permanent. If a broker raises its fees or you outgrow it, you have two ways out. A transfer of securities moves your holdings to the new broker without selling; it keeps your purchase prices and avoids a taxable sale, but takes weeks and may cost a fee per position. Selling and rebuying is faster and simpler but may trigger tax on the gains and costs two sets of trading fees. For a small portfolio the second route is usually fine; for a large one with big unrealised gains, the transfer is worth the wait.
The checklist before you sign up
- The licence number is in the regulator's public register and matches the website.
- Client assets are segregated and an investor compensation scheme is named.
- I have priced my own routine - including currency conversion and custody - and know the yearly cost.
- The exchanges, the UCITS ETFs and the recurring purchase I want are available.
- I know what tax report I will get and whether a tax-advantaged account is possible.
- I can place a limit order easily and support answered my test question.
- I understand how this broker earns money from me.