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Finding a broker, er, consultant you can get to know and trust

By Staff writer of The Christian Science Monitor / November 16, 1984


Choosing a savvy broker is like finding a good mechanic: They seem few and far between. And alas, the Yellow Pages offer no ''Mr. Good Stocks'' listing for skilled brokers.

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So word of mouth may be the best initial approach. Ask friends who are avid investors, talk to your lawyer, accountant, or banker. Also, many cities now have cable television programs where local brokers chat about stocks they're recommending. And some brokerages sponsor public seminars. From either source, you may find a ''financial consultant'' or ''investment counselor'' (as brokers are wont to be called) whom you can understand and trust.

If that path yields slim returns, try shopping around. But before you trot off to your nearest brokerage firm, think through your investment objectives.

''Be clear on what you want,'' advises Dr. James B. Cloonan, president of the American Association of Individual Investors, Chicago. ''Vague objectives, such as 'I want to make as much money as soon as I can,' won't do.''

Know how much risk you're willing to take: Can you afford to lose all, some, or none of your capital? Do you want income? (That is, are you interested in safe, steady dividend payments and don't mind if the stock itself stays put?) Do you want growth stocks (little or no dividends, but a high potential for a stock itself to appreciate)? Is the money for college or a new car? Do you need it now , or years hence?

If you know what you want, then the broker can serve you better. The likelihood of costly misunderstandings is reduced. And you won't be tempted by stocks that don't meet your needs. ''When your broker calls, you've got to be able to say 'no' when he offers you a speculative stock,'' Dr. Cloonan says.

On a recent morning, one would-be investor made the rounds at a few Boston brokerage houses. Our intrepid stock player, let's call him Jose Bigplay, had never been in the market before but wanted to venture forth with $2,000 to $3, 000. He was looking for capital gains - growth stocks - but was willing to wait a year or two for the return.

A nice man at Goldman, Sachs & Co. patiently listened to Jose's investment patter. But it seems that Goldman, Sachs does most of its business with institutions. When Jose revealed the size of his nest egg, the broker gently pointed out, ''Generally, our individual accounts begin at half a million.''

Exit Jose Smallpotatoes.

Next our neophyte investor knocks on the door at Dean Witter Reynolds. An eager young broker tells him that $3,000 is ''a little low,'' compared with most of his clients; nonetheless, within five minutes he's angling for Jose Bigplay's signature on a form to open an account. He is rebuffed with an explanation that Jose is still at the window-shopping stage. His remarks, however, are being judged against what several other brokers say. So the Dean Witter broker suggests Jose put his wad into a growth stock. He pulls out an analyst's report which recommends a company that produces machines for making semiconductors. ''Hold it six months and it should appreciate 20 to 30 percent,'' he counsels.