Full Service Brokers
A full service broker means exactly that – full service. Some of you may remember the full service that service (gas) stations use to have years ago. The word "service" is not really associated too much with gas stations these days. Anyways, in a full service gas station you would pull up your car, roll down your window and a nice, pleasantly dressed person would greet you with a smile. He / she would then ask you what grade of gasoline you would like. After starting to fill your tank, he would proceed to check your tire's air pressure, check the oil and fluid levels under your hood, wash your windows and ask if there is anything else you required. Full Service.
This is the same kind of atmosphere that full service agents are creating for their clients, something expected and a step above the norm in this world where norm is expected. In their competitive efforts to be top dog on the block, full service brokers have provided an environment of services that would make any client lightheaded with delight. These firms have products and services such as stocks, bonds, the brokerage's own mutual funds, tax information and advice, options, futures, money market accounts, insurance, checking and savings accounts and most of all the alwaysought after advice and research which never seems to end.
This advice is delivered by squads of analysts and managers employed by these brokerages. They analyze, investigate and dissect trends, corporations, market sectors then produce investment reports to be distributed on a regular basis to their brokers and clients. Some of these analysts / managers have a heavy voice and large impact on various areas of the marketplace, as their investment reports sway, to some degree, how clients invest their dollars and where. Having the advantage and information available to their clients is the name of the game and this is where full service brokers shine. Shiny things usually come with a price and this is no exception. Higher commission costs are always adjusted with the extras of full service.
If your lifestyle demands that they do the work with you exceeding his tasks, then the full service is just what you are looking for.
Discount Brokers
The definition of discount broker concludes more than paying less on responsibilities. Many veteran traders like discount agents because it fits their trading needs like a glove. Some traders feel more comfortable researching their own trades with the sense of being in control of their investing choices. These traders have a higher affinity with discount and online service. They will vary in their advice content from no advice to little. This is sometimes due to the liability of giving such advice and being accountable for it.
Many of these agents do suggest trading strategies and investments to help their clients but this is in a limited amount. Cost per trade will deviate from firm to firm but most keep in the same range so as to stay competitive. Traders may also pay more for orders other than market or limit orders, such as option spreads, short sales, covers and margin orders. Keep in mind that (even more so) with discount representatives, you are responsible for every aspect of your investments and trades. Ensure you know what is taking place with every trade and why.
You're not going to be paying the expensive full service prices, but they are bit more than the online representative and in many cases it's worth it. This is the middle ground for brokers and if you are up to doing some of your own research, this area can be very rewarding and can increase your financial knowledge to a marked degree.
Online Brokers
The internet, as you know, has changed the world and the way we perceive it in all aspects of our lives. This is blatantly evident as the internet changes so does the business and economies of corporations, countries and the world. This could be good or not so good depending upon how you wish to view it and / or use it. The liabilities of online investing are fewer today than five years ago and many more traders are flocking to online brokers just because of the convenience it offers to the trader. As long as you have a computer and an internet connection – you're in. Anything is possible.
Online brokers charge less than any of the others but you find personal service has slowed to the minimum here. Investigating these agents for efficient, quick trades and server uptime will prove fruitful when selecting an online service.
The server should be up and running the majority of the time or this could mean problems for you down the line. Do they have a backup system? Phone lines? What is their history of downtime?
Traders who like to manage their own accounts, research markets and possess a working knowledge of both strategies and the markets are at home with online brokers. There are many to choose from so take your time, read some user reviews, talk to friends, neighbors and associates who employ online brokers and select the one which will benefit you and your portfolio. If one does not meet your needs, select a new one more suitable. Do not cling to something that is not worthy of your needs.
Online brokers offer many features to their websites including online education of financial markets, strategies, web seminars, unlimited resource of books and articles, coaching, etc … and are expanding these areas daily. Quotes online surplus from real time quotes to delayed quotes. Some also offer screening and pricing software, charts, trade and risk / reward calculators as helpful tools to online investors. Most agent assisted orders are unavailable to the investor online, but if you look hard enough you will find a few willing to assist at no charge on some orders.
SEPARATING BROKERS
How can you discern between full service, discount and online brokers? What are the major boundaries that separate agents and their firms?
The commission cost the investor pays, and the quality / quantity of service plays a large role in how you divide the boundaries among brokers. It's not simply black and white as brokers are rated in different areas such as; annualized return on stock, mutual funds, products, services, commission, fees and research tools to name a few. Examples are:
Preferred full service include Merrill Lynch, Smith Barney, Edward Jones and Morgan Stanley. Commissions can range from $ 50 – $ 120 per trade. Service and advice is invariably a five star distinction.
The top rated discount brokers include OptionXpress, Muriel Siebert, TD Waterhouse and Ameritrade. Commission costs range from $ 10 – $ 40 per trade typically. Service and advice widely varied here and should be investigated as to personal needs.
Online brokers include Tradeking, Firerade, Scottrade, etc … Commission range from $ 5 – $ 15 per trade with some help-your-self services and advice available online and some by phone.
Discount and online services are hard to separate at times, but does it really matter that much? The bottom line here is that you want to match up your needs and requirements with the exact service representative which provides them. If one person calls the broker "discount" and another person calls the same "online", it's still the same agent. Focus on your goal.
Would it benefit you to know the basics in investing, even if you had a full service broker? What are the best questions to ask a prospective broker? Are YOUR goals included in your financial plan? Keep these things in mind when looking at your goal.
