US Capital Markets

Broker Types

Brokers in the US can be divided into three categories.

  1. Full-Service Brokers.
  2. Discount Brokers.
  3. Online Brokers.

The services that the brokers offer, along with the fees they charge, mark the differences between them.

 

Full-Service Brokers

Full-service brokers offer their customer the widest possible range of services.  In addition to performing purchases and sales, full-service brokers offer financial advice and market research.  These are the important characteristics of full-service brokers.

Customer Relations:

When a customer opens an account, he is assigned a customer service agent who is responsible for all aspects of his account.  Generally, the agent is a broker or a certified financial advisor. This customer service agent will all of the customer’s transactions and answer any questions he might have.  Most brokers offer a wide variety of service options, from ones that include only the ability to complete transactions to more extensive ones that include financial planning and tax advice.

Services

Most full service brokers offer the following services.

  • Investment Advice

This includes help in choosing the best securities and in building the most appropriate investment portfolio.

  • Market Research

This service gives the customer information and analyses about the economy, particular markets, and specific corporations.

  • Access to Initial Public Offerings

The full service brokers provide their clients with the opportunity to take part in initial public offerings of stocks and bonds.

Fees:

The fees that full-service brokers charge are generally, considerably larger than the ones found at discount and online brokers. Later on in this chapter, we will compare the fees charged by the different types of brokers.

Discount Brokers

Discount brokers offer their clients a low cost plan that comes at the expense of some services and the personal assistance that full-service brokers offer.  Recently, discount brokers have significantly expanded their customer base and have taken an important place in the American market. Discount brokers are appropriate for customers that do not need constant advice and are satisfied with being able to perform transactions. Following are the discount brokers important characteristics.

Customer Relations:

As opposed to full-service brokers, discount brokers do not give each client a dedicated representative. Rather, the customer is invited to call the customer service center, where a team of agents is available to assist anyone that calls.

Services:

Most discount brokers only perform market transactions. Recently, a few brokerage firms have began offering limited market research and advice.

Fees:

The fees that discount brokers charge are considerably lower than those at full-service brokers.

Online Brokers

Online brokers operate internet sites through which customers can perform transactions independently. These ‘do-it-yourself’ sites require technical knowledge and computer literacy. A client’s ability to access these sites depends on both the broker’s and the client’s internet connection. Problems or delays encountered on the internet could have ramifications to a customer’s account. As in the case of the other brokers, below is a list of services that characterize online brokers.

Customer Relations:

All interactions between the broker and the customer takes place through the internet. If there is a need to contact a customer service agent, clients can call a customer service center. However, some brokers will charge a fee for personal services.

Services:

Online brokers provide service only through their internet sits. These services can include computerized research and analysis tools, as well as links to corporations’ public reports. The customer can use these tools and information to choose the best possible securities.

Fees:

Online brokers charge lower fees than both full-service and discount brokers.

 

Broker Types534  Broker Types