Are there different types of stockbrokers?
There are two types of stockbroker:
Full Service stockbrokers
The role played by Full Service Stockbrokers has evolved over hundreds of years (the first stock exchange dates back to the 1600s). Today a full service stockbroker provides a range of services for investors including:
The major difference between a Full Service Stockbroker and an Online Stockbroker is the provision of personalised advice i.e. advice tailored to the requirements of each individual client. Historically this would have involved a consideration of local shares only. Today it is likely to involve other asset classes as well including
- international shares
- fixed interest investments
- hybrid securities
- investment funds
- real estate
- currencies
- etc.
Given the range of asset classes now considered by many Full Service Stockbrokers, other than advising on specific investments, a key focus is the provision of asset allocation advice i.e. advice relating to the proportion of the overall portfolio they believe should be invested in each asset class.
Increasingly Full Service Stockbrokers are also offering ‘discretionary portfolio services’. These arrangements enable clients to delegate investment decision-making authority to their stockbroker, in exchange for ongoing management fees.
Online Stockbrokers
The history of Online Stockbrokers began in the mid-1980s when technology enabled investors to gain direct access to transaction services via a stockbroker’s digital platform. Today the services provided by Online Stockbrokers centre around:
- Buying and selling securities
- Research
The services provided by Online Stockbrokers have evolved significantly since the mid-80s with a focus on delivering self-directed investors the tools they need to make better investments including:
- trading platforms accessible on most digital devices
- direct control over orders
- technical analysis tools
- community forums
A major difference between Online Stockbrokers and Full Service Stockbrokers is the level of the fees they charge to execute transactions. Given the near-absence of people in their service delivery process, Online Stockbrokers are able to operate at a significantly lower cost than Full Service Stockbrokers and as such, are able to charge lower fees to their clients.
Online Stockbrokers may also offer extra services to clients as their transaction volume grows (or in exchange for additional fees). These include access to more research, enhanced trading and analysis tools, greater control over order conditions, digital notification of events, etc.
To continue the process of finding the right stockbroker, read Choosing a stockbroker?
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