The Difference Between Full Service and Discount

By: Martin Lukac
Submitted: 2007-01-17 16:17:39
Print this article | Tell a friend | For publisher | Social Bookmarking
Rating:
 

When it comes to choosing a brokerage, you will have to decide between full service or discount.

The difference is basically in the amount of money you pay and the amount of help you receive in making decisions. A full-service brokerage firm will offer you every imaginable financial service. You will find everything from professional advice to even tax preparation. But you will pay for it. All of these services cost money, which you pay in high commissions.

A discount broker does not offer you all of the extras. Therefore, you pay significantly less in fees. Many people do quite well with discount brokers, and manage to save money as well.

Many people out there are cautious when dealing with a broker. I think that this is good. You should always be careful when handing your finances over to anyone. Make sure that you choose the right broker for you. You should feel as if the broker is acting in your best interests. That means that you don't feel pressured to make trades that you don't want to.

One of the best ways to start a relationship with a broker is to be upfront from the start. Remember, you are the boss here. Tell the broker your financial goals and make sure that your instructions are followed. Watch your account for excessive trading, which can cost you. Watch to make sure that you are making money. That is the number one sign of a good broker.

When you use a broker, you should see a return equal or better than the return on the S&P 500 Index. If you aren't, you would be better off cutting out the commissions and investing directly into a S&P index fund.

If you are already a good customer with a full-service broker, you can always ask for a discount on your fees. The worst the broker can say is no. If your account is a good one, many brokers are more than happy to adjust their commissions for you. Most full-service brokers feel the competition from discount brokers and are willing to compete.

You have to look at what you need out of a brokerage. If your financial situation is one in which you would really utilize a full-service brokerage, then that might be the right decision for you. But the key is making sure that all your needs will be met by the brokerage. You want to get your money's worth.

When you first meet with a full-service broker, you should ask a few questions:

  • How much do you charge to invest my money? Ask about wrap accounts, commissions and fee-based accounts attached to asset size.
  • Do you have a good research department with a good track record?
  • Do you monitor your brokers? You can always ask ot see the conduct record of the brokers to see if they are disciplined.
  • Do they provide on-line services?
  • Can I see a sample statement? You want to make sure that the statement is easy to understand.
Keep in mind that discount brokerages don't mean that you will make less on your investments. You simply pay less because there are fewer services. In some cases, you will pay 90% less. Discount brokers do not give investment advice, though many do provide research reports from experienced analysts. They are available to contact 24 hours a day and many have a strong Internet presence.

Martin Lukac http://www.MartinLukac.com, represents http://www.RateEmpire.com, an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com

Article source: Expert Articles

Most Recent Articles in Stocks Mutual Funds category

  • So You Really Want To Trade Online - By: Terry Detty
    This is a good overview for those of you who are thinking about testing the online trading waters.
  • How To Learn Short Selling With TIM - By: Terry Detty
    This interesting phenomenon that is called short selling is not something that every American believes that they should be doing.
  • Carbon Emission Trading, The Basics Explained - By: Dwayne Strocen
    The Kyoto Protocol of 1997 was signed by 38 signatory countries to address the issues of greenhouse gasses and resulting climate change issues. The following article will provide an understanding of trading greenhouse gas emissions.
  • Using Technical Analysis To Manage Risk And Maintain Top Quartile Performance - By: Dwayne Strocen
    To manage an effective risk management solution requires more than the calculation of VaR. Ultimately a successful risk management program requires the execution of an effective hedge. Technical analysis is a vital element of this strategy.
  • To Sell a Stock or Hold--When Is it Time? - By: Dr. Winton Felt
    Should you use the strategy of the long-term buy-and-hold investor or the short-term sell tactics of the trader in order to lock in small gains? Let us look at a few alternatives and possibly a strategy.
  • The Probability of a Stop Loss Being Triggered - By: Dr. Winton Felt
    Sometimes there are no obvious regions of price support that can be used as a reference for placing a stop loss. However, by using a volatility-based stop loss, you can set your stop so that it is statistically improbable that it will be triggered by a stock's normal fluctuation within a given holding period. This can give a stock enough "wiggle room" to continue its climb without a high risk of a premature sale because of a non-significant lurch of the stock.
  • Trading Veteran Reveals Must Have Hints and Tips on Trading that Every Trader Should Know - By: Philip Birchley
    Your trading system is a set of rules that you have built up that should be met before you enter a trade. The more ways that a trade is confirmed- the better and the more money you're likely to make.You might wait for a certain pattern to emerge on the charts that indicates that you should trade- so you might find a buy signal for example.
  • Should You Step into Foot Locker? - By: Dennis Biray
    With the NBA and other sport seasons flaring up this autumn, you may be wondering if now is the perfect opportunity to purchase shares of Foot Locker (FL), especially since they will be releasing earnings shortly (November 19, 2006). While such may be said as a good deduction, there are other, more profound reasons and answers to this question which, may, unfortunately, delay or even abort your decision to carry on your purchasing intentions. While all the economic and fundamental analysis may signal a strong run for this company, the technical analysis side of these indicators weighs much more heavily in a stock like Foot Locker.
  • 7 Stock Market Tips You Can't Live Without - By: Joseph Harris
    Every day there are a dozen new HOT stock market tips that guarantee your financial success. Every day there are hundreds if not thousands of people that jump on the bandwagon, and every day, each of those people are disappointed.When it comes to popular stock market tips, there is no golden ticket to striking it rich.
  • The Basics of Investing in Stocks and Shares - By: Joseph Kenny
    Stocks can be considered a tool for building wealth, as they are a part of almost every investment portfolio. They represent the ownership of a company and are bought in the form of shares. Shares refer to the stock of a particular company.