What are Discount Stock Brokers?
By: Anne Durrell
Even though many investors have switched to online trading, brokers, including discount brokers, still handle individual trades and institutional trades. Institutional clients are insurance companies, pension plans, endowment funds, and very wealthy people.
If you only make a few trades each year, say, less than 20, then the difference between commissions between brokers probably won't make much of a difference. In these cases, top customer service should be your priority. But for heavy traders, a discount broker could make a difference, particularly if there are further discounts for larger accounts or heavier trading volume.
------------------------------------------------------------------------------
Buy Money FOREX ROBOT Now. CLICK!
In recent years, however, the line between discount stock brokers and premium stock brokers has become more and more blurred and broken. While discount stock brokers offered cheap trades, but not much in the way of advice or service, premium brokers offered extra customer services and more hand holding with investors. But now, there is almost a reverse arms race with stock brokers, as more premium brokers lower their fees and commissions and more discount brokers add new services.
The actual seeds of this change were sown back in 1975. At that time, full service brokers controlled everything and charging high commissions was standard. But in 1975, full service brokers lost their hold on the stock trading business and discount brokers zoomed in with their low fees and made an enormous impact. The old system has been completely wiped out with the advent of widespread Internet access, which has given investors access to much more financial information than ever before. Full service brokers have realized that they have to change in order to stay in the game.
With the seeming melding of the worlds of premium brokers and discount stock brokers, it might be more difficult, however, for the individual investor to choose one. Online research can help. For example, SmartMoney.com does an annual ranking of best and worst brokers (discount and premium) based on six criteria: commissions and fees; research quality; mutual funds, trading tools and investment products; customer services; and banking service.
While the distinction between discount stock brokers and full service stock brokers is much less stark than it was 30 years ago, there are still enough differences that the individual investor should research a number of them and make his or her decisions based on the level of service and frequency of trades desired.
Copyright 2009 Currency-Trading-Basics.com
Currency Trading Basics | Privacy Policy | Contact Us | Sitemap