DISCOUNT BROKERS V/S FULL SERVICE BROKERSNovember 21, 2019
Any transaction in the stock market is carried out using the online trading platforms provided by various brokerage firms and individual brokers. Dematerialisation of shared and other securities has completely revolutionized the trading process in India. More and more individuals are investing their surplus amounts in various kinds of securities traded in primary and secondary market. Brokerage firms provide a range of services which help traders to make the whole investment process hassle free and smooth. Their services range from simple help in opening of online Demat accounts to more complex and intricate services like wealth management, insurance and provision of allied market information for making informed and timely investment decisions. They charge a fee for their services which is termed as brokerage.
There are two broad categories of brokerage firms or brokers which are as follows:
- Full service brokerage firms and businesses:
Full service brokerage firms provide numerous services to traders and investors like assistance in trading, provision of market trend reports and conducting market analysis. These services are provided to traders for a fee which is termed as brokerage. Large brokerage corporations charge high brokerage in return for the intricate services provided by them to traders. However, the fee they charge may be exorbitant and are suitable for frequent investors who want professional help for creation of a diversified investment portfolio. They provide other allied services like advice on investing in shares, debentures, mutual funds and even currencies of Indian and foreign share and commodity markets.
- Discount brokers:
Discount brokers in India have entered the trading and brokerage industry in the recent times but have completely revolutionized the investment process. The main difference between full service and discount brokers is the fee they charge for their limited services. Discount brokers as the name suggests provide only limited services which does not include wealth management or insurance and only assist in buying and selling of securities on the online stock market. The best feature is that the brokerage they charge for their limited services is 80 to 90% lower as compared to full’s service brokers. They rely on the online trading platform as the medium for share market investment. Small traders do not interact with discount brokers on a regular basis which decreases their operating cost. They provide excellent and timely customer support services. Moreover, their unique call and trade facility make them a better option for frequent but small cap investors.
A new entrant must make an informed decision while choosing between full service and discount brokerage firms. Cost of transaction, account maintenance and consultation fees are the most important Parameters which must be kept in mind while selecting the best type of stock broker. A trader must select a broker depending upon his/her financial needs and the services he/she needs from the broker. Discount brokerage is relatively a new concept which has completely changed the trading industry for good. Discount brokers in India and full service brokers have different advantages and disadvantages. Each and every advantage and disadvantage must be carefully analyzed and measured in order to select the best broker.