Difference between A Full Service Broker and A Discount Broker

Last updated on July 6, 2021

Investing in stock market is always an exhilarating and exciting as investors expect to get impressive returns over a period of time. To some extent, this statement seems true but in order to make this happen, it is necessary that a person take right investment decisions at the right time.

Discount broker or full-service broker – Which is the right choice?

According to stock market experts, the best way to make a steady step ahead is to choose a best stock broker who can provide all sorts of help in regard to investment. At present, there are two options in this regard – Discount Broker and Full-service broker. A large number of people get confused as which one they should go with. This confusion seems quite obvious, especially among new investors who remain doubtful about every step they take.

Deciding between a full-service or discount broker is a crucial decision for investors. Should you go with the forthright, cost-effective product, or choose the expensive, more service-oriented experience?

Though both the brokers pave the path towards sound stock market investment, there are many differences between them. In the following section, you’ll get to know more about them.

Conventional or full-service brokers

With this type of brokers, you can choose to buy and sell stocks, bonds, mutual funds, exchange-based funds and other investment offerings.

Traditional “full-service” brokers are known to do a lot more than just enable the buying and selling of a stock or bond. These brokers are meant to offer a wide range of services and products, including financial and retirement planning, investing and tax advice and timely portfolio updates.

As you get customized recommendations and service, conventional brokerages often come with a big higher fee, usually charging 1-2% on the assets managed. For example, an INR 100,000 portfolio would cost INR 1,000 to 2,000 in fees on an annual basis. That could eat up your profits over the long run.

Traditional brokerage fees are something that ask for careful consideration, particularly if you are investing and planning for your retirement. But if you really don’t want to invest on your own—rather than favoring personalized advice and guidance—then a traditional brokerage could be the best way forward.

Discount brokerages

A discount or online brokerage could be a sagacious choice for the money-conscious investor who chooses to go it alone. These brokerages will typically not offer investment guidance, though it’s common for a discount brokerage to offer free research and educational tools to help you make sound investing decisions.

Discount brokers are available in all shapes and sizes. Some will provide improved investing tools than others, but cost higher fees, while others might provide only the basic things, but incure the lowest fees.

With discount brokers, you can either perform a stock trade online automatically through an automatic trading system or call in your order with a broker over the phone—however the latter option is supposed cost you more.  Some discount brokers charge annual account charges, although this often isn’t the case. However, you’ll probably just have to pay an INR 10 to INR 20 commission fee on each buy or sell order, although the actual cost will depend on your broker.

The Verdict

When it comes to choosing between both the options, whether it’s a conventional broker or a discount operation, there is no one ideal choice for every investor. It basically depends on your personal situations and preferences, understandings the costs versus the benefits of each broker, and prudently comparing the level of services and features that are being offered.

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