What Does A Full Service Brokers Do?

A stock broker or a broker is an intermediary between buyer and seller who helps them to make a transaction. Brokers are the people who handle customer orders to buy and sell securities. They are the ones who enable the trade to be completed.
If there were no brokers, then we would have to find a counter party for a trade, and that would mean to wait for months sometimes, like in a pink sheet stocks. Also, if the price that the other party offered was lower then we wanted to sell at, than we would have to wait for another buyer.

So, we have a middlemen. That is a stock brokerage company. To make a living and provide their service, they charge a fee. That fee is usually charged on a "per trade" basis. So if you buy a stock today and sell it tomorrow, you pay commission two times. 

These three main types of stock brokers are:

• Full service brokers or advisory stockbrokers
• Execution only brokers
• Discount brokers

In recent years, there a variations of discount brokers, such as: deep discount brokers and direct access brokers.

WHAT IS A FULL SERVICE BROKER AND WHAT AN ADVISORY STOCK BROKER?

Full service broker or an advisory stockbroker offer a service where broker who act as a financial advisor, discusses or reviews the investments of a client on a regular basis or when client requires, and he build a portfolio for him. The client makes the final decision to buy or sell. The adviser will supply research materials relating to markets, sectors and individual firms, and knowing individual needs of a client, such as his age, risk tolerance etc. The stockbroker will also make a specific recommendation for what stock are good to buy at the moment.

The relationship between a broker and a client will grow close over time. It is vital that both sides have clear guidelines as to how to work, and laying these principles down should be the role of the advisory management stockbroker. The client will almost certainly need a reasonable understanding of asset allocation and portfolio management techniques, or at least, importance of these in maintaining a client’s portfolio.

The costs associated with this type of brokers are highest of all. If you do not use an advisory management brokers, who charge up to $500 per trade, but use full service brokers, they will charge you from $30-50 per trade they execute for you, and they will give you advices about companies worth investing in, but they will not plan and maintain your portfolio, like an advisory management brokers will. Other costs include:

• Fees for transferring assets both into and out of an account
• Account maintenance fees
• Inactivity fees
• Interest on margin loans
• Sales charges on certain securities (such as loads on mutual funds)
• Fees for not maintaining a minimum balance

The biggest benefit for someone without experience is the opportunity to have a reputable firm guide you through the process of buying and selling stocks. Although it is highly probable that the fees will cut into your returns, you may be better off in the long run because a good broker can hold help you to overcome recession, and help you to avoid mistakes such as selling at market bottoms or buying during speculative bubbles.

CONCLUSION

If you have no idea about stock market and need someone to hold your hand while investing, and on the other hand are prepared to pay for it, I say go for full service brokers. On the other hand, if you understand importance of keeping your overheads as low as possible, see you in the next post about the executuion only brokers.