Full-Service Broker Explained: Is it the Right Option for Your Investing Needs?

ByG. Dautovic
June 23, 2022

Making any kind of investment can be a scary proposition, and hiring a professional to facilitate the process is a wise idea. One solution is to hire a full-service broker. Read on to find out what this position entails, how much it costs to employ one, and what your other options are. 

The Definition of a Full-Service Broker

Before we go into detail, let’s define the full-service broker role. So, what is a full-service broker, then? It is a type of financial advisor whose job is to buy and sell assets such as stocks on behalf of their clients. 

What Does a Full-Service Broker Do?

Their primary responsibility is to assist clients who wish to make an investment. Any type of broker carries out trades on behalf of their clients, but a full-service broker offers a wide range of investment services.

In addition, they are authorized to provide expert advice, including estate planning and tax advice. Their guidance is based on in-depth research and analysis. 

The Expenses of Hiring a Full-Service Broker

On average, full-service brokers charge a fee of $150. However, you should know that there are a few types of brokerage fees, including broker commissions, account maintenance fees, platform fees, and inactivity fees.

A broker commission refers to the percentage of the trade paid to the broker. Account maintenance fees are fees for keeping the account open. 

Platform fees are sometimes charged to compensate the broker for using the trading platform. Lastly, some brokers charge inactivity fees for inactive accounts to prevent clients from keeping funds on their brokerage accounts without making any trades for longer periods.

Pros and Cons of Hiring a Full-Service Broker

A full-service broker may be of great value to one person and a waste of time and money for another. Before making a rash decision and contacting the first full-service broker you can find, you should do some research in the field. 

Here are some advantages and disadvantages to hiring a full-service broker:

Advantages

  • Their expert knowledge can help you make smarter investments,
  • You have the opportunity to access their research resources,
  • They offer additional services, such as estate planning.

Disadvantages

  • They charge costly fees,
  • Some full-service brokers may use a tactic called churning or excessive trading to get more from the commissions,
  • You may disagree with their decisions.

In short, a full-service brokerage firm is suitable for investors who need professional investment advice and can afford to pay the full-service broker fees. 

The Alternative Options

As an investor, hiring a full-service broker isn't your only option. There are also some DIY options you could try. For instance, you may contact a discount broker or download investment apps. 

The difference between a full-service broker and a discount broker lies in the fact that the latter provides the tools for their clients to conduct trades, including an online platform, while a full-service broker guides them throughout the whole process or makes the trades for them.

In other words, a discount broker offers the platform and, in some cases, research materials, but the client typically doesn’t receive advice on what stocks to invest in. For that reason, the fees a discount broker charges are significantly lower. When they offer additional services, the price goes up quickly.

You may also consider some of the top-notch investment apps available on the market. These apps come at a much lower cost than utilizing the services of a full-service brokerage firm. 

Not only that but there are stock apps like Robinhood with an intuitive user interface suitable for beginners. Remember that you should research the investment options these apps offer before signing up because some of the more affordable ones have minimal features.

Summary

As you’ve seen, full-service brokers can be beneficial for those looking to make a sizeable investment. Hiring these professionals can help reduce the risks, as they offer complete guidance, which is especially useful for beginners.

It’s up to you to decide whether this type of service will actually benefit you instead of resulting in a financial burden. Therefore, do your research, consider your skill set and needs, and decide based on all of these factors.

FAQ

What do full-service brokers do?

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Full-service brokers offer various services, but their primary purpose is to facilitate the trading process. They purchase and sell client assets as stocks and advise their clients on matters such as tax payments.

How much does a full-service broker cost?

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A full-service broker fee costs $150 on average. However, this varies from firm to firm. You should research different brokers and determine which one is right for you in terms of the service they provide and the fees they charge.

What are the two advantages of a full-service brokerage firm?

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The two advantages of employing a full-service brokerage firm are getting expert advice and guidance and access to highly-useful research material.

What’s the difference between a full-service broker and a discount broker? Which is best?

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A full-service broker differs from a discount broker in its services and cost. The former guides the client every step of the way and charges higher fees. The latter merely offers the client the tools to carry out the trade.

Each broker is suitable for a specific type of customer. Clients who require assistance making investment decisions can benefit from full-service brokers, while those simply looking for resources and lower costs will probably prefer a discount broker.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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