Documents required to open a brokerage account

During the application process, you'll need to provide three types of information. These will be very similar at all brokers, though the exact order or wording of the questions may of course vary.

1. Basic personal and contact information:

   • Name

   • Address (including country of residence)

   • Date of birth

   • ID number, Social Security Number or equivalent

   • E-mail address

   • Phone number

2. Your financial and trading record:

   • Employment status and monthly/annual income

   • Net worth

   • Trading experience - what type of assets, and how often, have you traded (if at all)

   • Financial knowledge - this might take the form of a short multiple-question quiz

3. Documents for identity verification:

   • Upload a photo ID (ID card, passport or driver's license) to verify your identity

   • Upload a recent bank statement, utility bill or any official document that contains your name and address - this is to verify your address

This may sound like a lot of information, but if you come prepared, you can complete your application in about 15 minutes at most brokers.

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So what's the purpose of all these questions you need to answer when you open a brokerage account?

It is a procedure called KYC, meaning "know your customer" (or "know your client").

KYC checks are required by law in the US and elsewhere, and are enforced by financial regulators, such as the Securities and Exchange Commission in the US.

For brokers, KYC verification serves two purposes:

• To establish and verify your identity - that is, to check that you are an actual person and you are who you claim to be

• To establish your risk profile - in other words, to see how solid your financial situation is and how much you understand financial markets

Verifying clients' identity is needed so that brokers can prevent the setting up of bogus accounts, or be alerted to attempts at money laundering. In most countries, brokers must also monitor and report whether any of their clients may be engaging in terrorism financing.

The part of the KYC process involving your risk profile is required by law, but it is also in brokers' best interest to know your objectives and limitations. This allows them to recommend the right products for you, or restrict access to assets that may be too risky for you based on your experience or financial situation.

For the state and regulators, it is in their interest to ensure that large masses of the population aren't losing all their savings by trading assets they don't understand.

KYC processes also include giving your consent to the broker's terms and conditions, as well as declaring that you understand investment risk and are aware of relevant regulations. Read these carefully before ticking 'agree'. Please note that KYC requirements and the range of KYC documents accepted for identity verification can vary by country or jurisdiction.

So what's in it for you? Actually, know-your-customer rules exist in part to help and protect you. Verifying your identity can help prevent identity theft - in other words, someone else opening an account in your name using your stolen data. Meanwhile, submitting your contact details allows the broker to reach out to you with offers, alerts or assistance.

By giving information on your trading experience and financial knowledge, you allow the broker to size you up and give you access to the right asset types. This can keep you from taking too much risk too soon that would threaten your hard-earned savings. And don't worry - if you have gained some extra experience or your income situation has improved, you can always go back and update your profile.

Again, remember that brokers are required by law to ask for all this information. So there's no use thinking "OK I'll just find myself another broker where they aren't so nosy about my background". In fact, if you stumble upon a broker that does not require most of this information, there's a good chance that it is a poorly regulated broker or possibly even a scam broker.

If you want to avoid scam brokers, you're in the right place - we at BrokerChooser recommend only well-regulated and trustworthy brokers. Try our broker finder tool to double-check your choice or find yourself a suitable broker if you haven't already.

Once you have filled out the application form, uploaded all the necessary documents and hit 'Submit', it is your broker's turn to approve and activate your account. This often takes less than a day, and usually no more than three working days.

Sometimes your broker will get back to you for more information - maybe the data on your documents didn't match the information you submitted, or maybe you just uploaded your documents in the wrong format or resolution. If this happens, just follow the instructions and re-submit whatever information is required.

If your account is not activated after a few days and you receive no feedback from the broker, don't hesitate to contact the broker's customer support to find out what went wrong.