Difference between discount broker and full-service broker

Difference between discount broker and full-service broker

Having a tough time to choose between discount brokers and full-service brokers? Well, worry not. Choosing the right one may seem difficult when you have very less knowledge about them. All you have to do is know about them well enough and choose which one is right for you.

One thing you have to be clear is that deciding a stock broker depends on what you need rather than what they can do. This is what most people ignore. They just see what the services are that they can provide and choose accordingly. But the most important factor is what you need. That is what determines your stock broker. So remember never ignore what you need. Prioritize your needs and look for brokers who can satisfy them and not the other way around. That might collapse the whole purpose of your investment.

Differentiating discount brokers and full-service brokers is not so difficult. They have their own advantages and disadvantages. Once you know them you will be clearer about the concepts and services to look for.

Cost :
If you are holding a very less investment, I say you go for discount brokers. Discount brokers have very less to do to help you out in trade. Hence, their commission is less compared to full-service stock brokers. Full-service brokers have a lot to do when it comes to service and hence they are given a large sum of commission for their service. Both are worthy if the right stock broker is chosen.

As mentioned before a full-service stock broker provides service more than the discount broker.  However, the work of a full-service broker is well appreciated when he offers any of the monthly brokerage plans, per trade plan each segment plan that best suits your requirement. That’s the best thing about the service provided by the discount broker. The service of a full-service broker includes research, portfolio management, financial and retirement planning, etc… the work of a full-service broker have always been of great help especially for the beginners.

Type of trading:
Not all types of trading are suitable for either type of the stock brokers. For example, discount stock brokers are best suited for intraday trading. First reason is that you can’t pay much to the stock broker for a trade that is done in a single day. And secondly, discount brokers give quick suggestions with enough tools to make decisions in your trade. Mostly full service brokers don’t take up clients for intraday trading. And full-service stock brokers are of great help in delivery based trading.

Communication with clients:
Full-service stock brokers and discount stock brokers also differ in the way they communicate with the customers. Full-service customers have an office, which may be a part of huge branches network, that the client can visit for trading. Discount brokers usually provide their service online or via phone. The client will not be able to visit the office for any trading purpose. The way they communicate with their clients gives a clear idea about the difference in the service between them. Investors go to the full-service brokers for trading like that is a business necessity to be considered important whereas discount brokers are just a phone call away to answer your queries in a few minutes conversation. This shows the involvement of these brokers in your trade.

Full-service stock brokers are best in providing information. They give a complete idea about the trade you are involving in, the current affairs, mutual funds, etc.. On the other hand, discount brokers don’t provide any such information. They don’t give any information on IPOs, mutual funds, market prices, etc… their service is just as simple as giving few suggestions for their clients to choose from. The success or failure of the trade depends entirely on the knowledge of the investor when it comes to discount stock brokers.

With these differences known, you might be able to choose the right one that fits your requirement. In short, if you don’t need any advice from the broker and expect a cost efficient service, discount stock brokers are the best choice. But if you need some professional help to manage your large investment or if you are a beginner, you can opt for full-service stock brokers.