A full service broker offers a number of products to clients interested in investing. These services may include executing trades, researching, and providing advice to customers who want mentoring in the investment industry. Fees tend to be higher for these kinds of brokerages, and may include annual fees in addition to commissions on trades. By contrast, discount brokers offer fewer services, but charge much less. The best option for an investor can depend on the level of involvement desired, as well as investing experience.
Customers of a full service broker may be able to access a variety of services. Some brokers can manage portfolios on behalf of their clients, after helping clients select a good mixture of investments. They can also advise their customers on purchases that fit with their investment strategy and might be good additions to their portfolio. Seminars and other education may be available through a full service broker for customers who want to learn more about the financial industry and take an active role in their investments.
Research can also be provided through a full service broker. This can include evaluations of investments, complete with detailed written reports and recommendations. Customers with questions about different investment products and classes of investments can ask for reports on them to learn more and make decisions on the basis of the information provided. Support with taxes may also be available, to help people manage their tax liabilities and ensure that documentation is filed appropriately.
One concern with a full service broker is the risk of a conflict of interest. Many brokers receive compensation on a commission basis, which creates an incentive to encourage customers to make trades. This may not be in the interest of the client, depending on the market and the investment strategy. To avoid such conflicts, firms can compensate on the basis of investment performance, which encourages brokers to advise their clients to make the most profitable decisions so they’ll earn a higher fee at the end of the year.
Clients considering a full service broker may find it helpful to research several firms to get information about rates and services. Current customers may be able to provide information about their satisfaction levels and any recommendations they might make. People may want to consider how much contact they want to have with their brokers, and what kinds of services they think they are most likely to use with a brokerage account.