| Full Service Brokers |
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Full service brokers are the oldest and most popular type of brokers. They are what most people think of when they hear the term 'stockbroker.' Clients of full service brokers get personal representatives (a licensed stockbroker) to help guide them through the investing process. A broker is not an advisor in the same way that a financial advisor is. A broker's primary obligation is to make money for the firm, and is not obligated to have knowledge of or advise clients on how to allocate and manage their money (although the best stockbrokers do provide this type of knowledge and guidance). In addition to a personal representative, clients of a full service brokerage generally have access to the firm's proprietary research. Clients also have the advantage of having their orders executed through the firm's own traders. Having this type of service can be highly useful to investors who are concerned about getting the best execution price on large trades. Full service brokers generally charge much higher commissions than discount brokers, although their commissions are negotiable, unlike discount brokers'.
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| Discount Brokers |
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Discount brokers offer trading services that are comparable to those of full-service brokers. They generally don't offer much detailed research or personalized advice. Some discount brokers only trade online, some only offer phone trading, and some offer both online and phone trading. Commissions are generally a lot less than at full-service brokers. Discount brokers are ideal for knowledgeable investors who will be making all their own decisions and don't need (or don't want to pay for) investment advice and research reports. In addition to this, many services, including Zacks.com are now selling detailed brokerage research reports (the same ones that clients of full-service firms have access to) over the Internet. For investors who find and research stocks on Zacks.com, a discount broker may be an ideal choice.
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| Online Brokers |
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One of the leading areas of the recent Internet boom has been the online brokerage industry. Online brokers are really a subset of discount brokers, with most representing the extreme end of discount brokers (commonly called deep-discount). Online brokers offer investors ultra-low commissions, the convenience of trading online, the ability to place orders at any time of the day, access to online research, quotes, and many other features (depending on the firm). However, they generally don't have very good customer service, many have been unreliable during times of heavy trading, and they don't offer the personalized guidance that full service brokers offer. For the do-it-yourself individual investor, an online broker may be the ideal choice. Trying to pick an online broker can be a challenge, given the number of brokers and the intensity of competition. Brokers are constantly bombarding investors with ads and promotional offers. If you are interested in opening an online brokerage account, we suggest that you pick a few brokers that have features you prefer and then do a detailed evaluation and comparison of those brokers.
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