Full Service Brokers vs Discount Brokers

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Full Service Brokers vs Discount Brokers

When it's time to choose a full-service or discount broker, many companies will compete for your business. In this article, we'll analyze both to

Any transactions which happens in the financial market needs to pass through a broker and his intervention. There are various registered brokers regulated by the Security and Exchange Board of India (SEBI) who deal in the market and help you with your investment decisions.

These stock brokers are the agents between the participants of the market and the actual market. While you can trade individually, there is a substantial need to hire the right kind of broker so that you get a good value for your money. There are two types of brokers in the market: full service brokers and discount brokers and this article will help you select which type of broker you should go in for.

What is a discount broker?

The upcoming age saw the emergence of online stock trading and a potential growth for the discount brokers. A discount broker is nothing but the one who carries out buy and sell orders at reduced commission rates and only deals in executing orders and no analysis. They charge commissions on their particular order and so earn their revenue. They also try to cut down on the cost as much as possible since they operate on a model where the overheads are low.

In brief, they provide limited service at lower prices than the rest. Most of these brokers have a user friendly interface in the online mode to support easy financial transactions. Some of the examples include Zerodha, Angel Broking, 5paisa, etc.

Advantages:

• The major benefit to select this type of brokers is the lower brokerage fees charged which is comparatively very less than the other full service brokers in the market.

• There are lower transaction costs as the accessibility allow these brokers to maintain their costing as per the users’ pockets.

• The plan is fixed for all trade types and you are free to make your choice in terms of the share price. Trade volume, the amount of investment as per the analytics on the dashboard or other features through their platform.

Disadvantages:

• There is no research, advisory or investment advices available through this channel of brokers.

• There are no branch services or Relationship Managers (RM) support and you can only trade through their facility.

Full service brokers

Full service brokers not only execute orders for their client but have a host of services available like portfolio management, research analytics, tax planning, sectoral stock research, research on trendy topics and much more. They have their physical presence at multiple location in the country and also have both online and offline services.

The commission charged by these type of service brokers is fairly high than the discount brokers but are always ready to provide the companies fundamental reports and technical calls for any investor.

Advantages:

• The provide a better exposure of every service to their clients.

• Dedicate relationship mangers to help throughout in terms of advisory and investment decisions.

Disadvantages:

• Higher charges due to the high volume trade.

Full service vs Discount Brokers

Full Service Brokers vs Discount Brokers

How to decide?

Now that we have established all about the full service and discount brokers, you might be wondering about the criteria of selection is if you wish to go in for any, so here are some of the key points you must keep in mind:

1. For discount brokers-
If you wish to work your way through with discount brokers, you might want to checklist these points-

• Self-sufficient research and taking own investment decision.

• Spendthrift in terms of investment in the market and do not want to spend large chunks of money in commission and fees.

• Good at using tools and getting the knack of using and analysing them on a daily basis.

2. For full service brokers-

• Need guidance as an amateur in the market.

• Have the financial capability to spend on the pricing plans of these brokers.

• Short on time due to your hectic work schedule and want to identify the suitable trading options for yourself.

Conclusion

The choice of a good broker is by far one of the most important decision in your life through trading. It’s solely a personal and independent choice as per your needs and preference and must not be influenced by any third person. Use your brain to play, analyse the market, research about various brokers in the line and select the best one according to yourself.