| Discount brokers are stockbrokers who don't give | | | | brokers, you are making the decision that you can |
| investment advice. Discount brokers are not always | | | | think for yourself, and that saving on the cost of |
| human beings the term "discount brokers" can be | | | | trading is more important than added services. |
| used to describe either an individual ("Frank and Sarah | | | | Full-service brokers typically offer personalized |
| are discount brokers") or a company ("OptionsXpress | | | | investment advice, as well as company-produced |
| and FirstTrade are discount brokers"). | | | | investment research reports. |
| Discount Brokers and Full-Service Brokers - A | | | | While discounters do not have the time or resources |
| Comparison | | | | to give individualized recommendations, a growing |
| In the days before discount brokers, only rich people | | | | number of them are producing research reports on |
| could afford to invest. This is because the | | | | various stocks, bonds, mutual funds, and other |
| non-discount brokers charged such high fees and | | | | investments, and others are making |
| commissions. Starting with Charles Schwab, discount | | | | third-party-produced research reports available to |
| brokers became more popular among average | | | | their customers, free of charge. |
| investors, and the fees and commissions charged by | | | | Several of the web-based discount brokers offer |
| discount brokers have been going down each year | | | | free, real-time streaming quotes, which is something |
| for the past several decades. | | | | that was once only available through full-service firms. |
| However, it is interesting to note that discount | | | | But the best way to determine whether or not your |
| brokers still lag full-service brokers in overall assets | | | | broker is a discounter or a full-service operation is to |
| under management. While discount brokers serve | | | | answer these questions: Does your broker provide |
| many more clients, affluent investors snub discount | | | | individualized advice, from one human being to |
| brokers in favor of their full-service counterparts. | | | | another? |
| As a result, despite the fact that discount brokers | | | | Does your broker require a large (in excess of |
| are more popular on an individual basis, full-service | | | | $10,000) minimum account balance? Does your |
| brokers are more popular in a total dollar basis. | | | | broker charge you commissions for each trade, or an |
| Charles Schwab, the leader among discount brokers, | | | | hourly fee for advice? While most full-service brokers |
| had a total of $510 billion in assets under | | | | still charge commissions instead of hourly fees, a |
| management as of 1999. By comparison, the | | | | growing number of them are beginning to go the |
| full-service broker Merrill Lynch had a staggering $1.7 | | | | hourly route, and it's probably best to select one of |
| trillion with a "t." The great disparity is due to the | | | | these brokers if you decide you want full-service. |
| fact that large institutional shareholders and ultra-rich | | | | After all, if you're paying for investment advice, you |
| individual investors often need services that go | | | | should be paying for investment advice - not paying |
| beyond simply placing buy and sell orders. | | | | excess commissions when you make a trade. In fact, |
| For example, if someone wants to move $1 million | | | | some consumer advocates question the ethics of |
| worth of Microsoft stock, it isn't as simple as logging | | | | non-discount brokers who charge commissions |
| into Ameritrade and placing a sell for 40,000 shares. | | | | instead of fees, saying that it encourages these |
| These huge "block trades" (as they are called) require | | | | brokers to recommend buying and selling, rather than |
| the finesse and experience of a full-service broker, | | | | holding, even when holding may be most prudent. |
| and big institutions and billionaire individuals pay dearly | | | | Discount brokers don't encourage you to buy or sell - |
| for this expertise. | | | | the decision is left entirely up to you, and most |
| If you don't need this kind of service, should you pay | | | | individual investors feel better about this type of |
| extra for a full-service broker? | | | | arrangement. If you can get some bundled services |
| Discount of Full-Service? Sometimes It's Hard to Tell | | | | (for free) at the same time, then all the better! |
| When you choose to use one of the many discount | | | | |