Question

Question 2 (Note this question is from the Week 6 Tutorial) Within the context of services provided by a stockbroker, discuss the two (2) main types of stockbrokers that an investor may choose to use. In your response, differentiate between the services provided by these two (2) types of stockbrokers. (7 marks. Word limit Maximum 500 words)

Answer 1

There are two main types of stockbrokers:

• Traditional Brokers (or) Full Service Brokers
• Discount Brokers

The Discount Brokers usually charge much less, while full-service brokers or the traditional brokers can be very expensive; however, they provide customized service.

Traditional Brokers (or) Full Service Brokers:

Traditional stock brokers or full-service stock brokers offer a wide array of services and products, including financial and retirement planning, investing and tax advice, regular portfolio updates, and margins to purchase investment products on credit which will be subjected to necessary terms and conditions.

Since the traditional brokers offer personalized investment or trading recommendations and services, brokerages charges can be expensive. Traditional Brokerage firms let the customers invest and trade in stocks, futures, options, currencies, and bonds in the Stock Market.

Discount Brokers

Discount stock brokers or online stock brokers usually allow clients to trade on their own with little or no interaction with a live broker. Discount brokers could be a better choice for the fee-conscious investors who prefer to do it all by themselves. These brokerages will generally not offer investment advice, although it’s common for a discount broker to offer free research and educational tools to help to make better investment decisions.

Since the discount brokers offer fewer services and/or support, brokerages often come with lower fees than a traditional brokerage firm.