Should a person use a full service broker or a discount broker?
Discuss the various factors that would go into make this decision - why would one person opt for full service while another might prefer a discount broker.
Best Answer
4107 points
MNSL answered 2 years ago …
It all depends on what type of investor are you and type of trading style that you have. For example if you are doing your own research and make your own investing decisions, then a discount broker should be your choice. If you are not expert in investment strategies, and are new to trading and investing, you may consider a full-service broker, until you are ready.
There are many factors that we should consider before selecting broker:
Hidden fees including commission, accounting charges and added charges
Reputability of broker (You must make sure broker is not going to bankrupt in the future)
Minimum opening deposit required and if so, how much is required.
Whether they offer better Service including 24 customer service
Whether research tools are available
Advantage in discount broker over Full- Service Broker:
Cheaper than Full service Broker
They charge lower fees than full-service brokers
Discount brokers have excellent research resources available to investors and offer online facilities as well
They get their business by having lowest prices and the best service
Although Discount brokers do not offer any advice they charge lower fees than full-service brokers
According to: http://www.tradewiser.com/brokers.html
Some of Discount brokers are:
Best Discount Stock Brokers
TD Ameritrade
Commission free trades for 30 days. No maintenance fees.
Fidelity
Trade the way you want for less. See why we're the place to trade.
E*Trade
Easy-to-use tools and advanced technology to help you maximize the potential
value of ALL your assets-from trading and investing to banking .
Scottrade
Buy & sell stock online for $7 a trade. Free research and trading tools.
Charles Schwab
Whatever your investing needs, Schwab has a solution.
Bank of America
$0 Online Equity Trading Available Now! Open A Brokerage Account Today .
Zecco
Up to 10 free trades per month. No gimmicks. No hidden fees.
Trade King
$4.95 per Trade, Market or Limit. No Minimums.
First Trade
No Minimums. No Inactivity Fee. Transfer to Firstrade for Free!
T. Rowe Price
Invest with confidence. We make it easy to expand your investment choices.
Marsco
$3.95 Online stock trades for market or limit orders. No share limit and no
inactivity fees.
ShareBuilder
Buy stocks for $4. No Account or Investment Minimums. No Inactivity Fees. Trade
Online.
Options Xpress
Trade stocks, options, futures and Bonds online with optionsXpress.
Think Or Swim
Retail & Institutional traders Open an Account & Start Today!
GFTForex
Trade Forex with GFT. Live updates: Dow Jones news, analytics & charts.
Forex.com
Free $50,000 Practice Account With Real Time Charts, News & Research.
FXCM
Start Trading Currencies With A Free $50,000 Demo Account. Play Before Pay!
Deutsche Bank
Try Deutsche Bank's free demo currency trading account now. Free at dbfx.com.
Interactive Brokers
Deep discount direct access broker offering online trading of Futures, Options,
Forex, Stocks.
Answers
699 points
7million7years answered 2 years ago …
Like everything in life this is a simple matter of Cost v Benefit:
Here are some of the KEY BENEFITS of using a full-service broker:
1. Advice on the market
2. Access to new issues (IPO's etc.) that you may not be able to access on your own
3. Telephone trades
4. Basic instruction on new ways to trade (e.g. covered calls, options, etc.)
Since I don't take advice from people who WORK ON a product rather than INVEST IN a product; or, invest in speculative/new issues (except, my OWN businesses!); or, care about trading by telephone (which a good on-line broker can also provide).
So, to me, it all boils down to:
Basic Instruction 'Included' v The Higher Cost per trade for a full-service broker (typically 1% v $7 for an online broker). Is it worth it ... heck no ... not when you can ask the same question right here and get the answer for free! :)
1130 points
sundarkambam answered 2 years ago …
Here are the many links to help one differentiate between a full service broker and the discount broker:
http://www.stocksandmutualfunds.com/comparing-broker-types.html
http://www.dfi.wa.gov/sd/beginninginvestors.htm
The inside stuff on what happens in a full service broker is in this link( a very interesting read..... Summary is always think commission....)
http://www.fool.com/features/1998/sp981209eyesonwise003.htm
991 points
rvilmur answered 2 years ago …
A discount broker is the best choice.
The real problem with full service brokers is that their real job is to generate commissions for their company without regard for the financial success of the customers. So they will push extra trades on their customers and retail some otherwise questionable stocks because the parent brokerage has a large position to get rid of.
A discount broker who gives no advice can't lead you astray. Good discount brokers do provide their customers with a large array of news sources, investment tools, and the best offer free real time streaming quotes. Low commissions really help the portfolio over a period of time.
You do need to learn about trading; but don't expect to learn much from a full service broker.
I personally use Think or Swim, TD Ameritrade, and Interactive Brokers.
