Discount Broker Advantage
Discount Brokers offer some significant advantage over full-service brokers, such as
Lower cost:
This lower cost is usually the result of lower commissions, and it’s the primary benefit of using discount brokers.
Unbiased Service:
Discount brokers offer you the ability to just transact your stock buy and sell orders only. Since they don’t offer advice, they have no vested interest in trying to sell you any particular stock.
Access to information:
Established discount brokers offer extensive educational materials at their offices or on their web sites.
What to watch out for
Of course, doing business with discount brokers also has its downside, including the following:
No guidance:
Because you are chose a discount broker, you know not to expect guidance, but the broker should make this fact clear to you anyway. If you are a knowledgeable investor, the lack of advice is considered a positive thing – no interference.
Hidden fees:
Discount Broker may shout about their lower commissions, but commission are not their only way of making money. Many discount brokers charge extra for services that you may think are included such issuing a stock certificate or mailing a statement. Ask whether they asses fees for maintaining IRAs or fees for transferring stocks and other securities (such as bonds) in or out of your account, and find out what interest rates they charge for borrowing through brokerage accounts.
Minimal Customer Service:
If you deal with an internet brokerage firm, find out about its customer service capability. If you cannot transact business at its Web site, find out where you can call for assistance with your order.
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