It can be a good idea to use a stockbroker for active management of your stocks or mutual fund portfolio, especially if you're aiming for steady growth. However, it may not always be necessary, as passive management alternatives are often available for long-term investing.

Many investors prefer to pay for the services of a broker because they feel more comfortable making financial decisions with the interactive guidance of a licensed advisor. However, when using a stockbroker, it's important to be aware that they typically earn commissions. This may incentivize them to trade more frequently, as more trades lead to more commissions. Stockbrokers are also compensated based on the results they achieve.

A potential conflict of interest arises when a stockbroker acts as both an advisor and a financial planner, as their revenue depends directly on your investments in the stocks or mutual funds they broker. This could affect the quality of the advice they provide, as it might not always align with your best interests. However, there are instances where certain mutual funds and stocks can only be purchased through a broker, making their services necessary.

If you use the investment services of your bank, there are a few things to consider. Banks often recommend their own financial products when discussing investment options. For example, in some countries, banks offer investment portfolios with a guarantee that you will at least recover your initial investment in 2, 3, or 4 years. While this may sound appealing, banks often charge a premium, such as 110% of the initial investment, which covers their costs and ensures profitability from the start. The result is that your portfolio begins with a 10% deficit, though many investors accept this due to the perceived security of the guarantee.

When a bank recommends investment options, it’s unlikely they will suggest portfolios managed by other banks, just as a Ford car dealer wouldn’t recommend you buy a Lexus. A stockbroker working for a bank is not neutral; their job is to steer you toward investments that generate the most profit for the bank. While your success is important, it is not their top priority.

Regulatory authorities exist to protect customers, and there are rules governing how stockbrokers should operate. These rules vary by country. In some cases, a stockbroker or their company may hold personal portfolios, creating potential conflicts of interest. There have been situations where customers suspected they were advised to invest in under-performing companies so that the broker could offload their own shares before the market declined. Proving such cases is difficult, and winning them is even rarer due to the high volume of transactions, which makes it hard to detect patterns of misconduct.

That said, most stockbrokers act professionally and understand that their business thrives when clients achieve positive outcomes. As a customer, it's advisable to review a stockbroker's track record rather than relying on advertisements. Independent online platforms now offer performance statistics for stockbrokers, funds, and shares, providing essential data to help guide your future investment decisions.