While choosing a full service broker vs discount broker, it is important to understand the difference between the two kinds of stock brokers. It is all about Value adds Service vs Deep discounted brokerage rates. Let us discuss advantages and disadvantages of both Full Service broker and Discount brokers.
Having decided to invest or trade in stock market, the next decision that is required to be taken is to choose between full service broker vs discount broker. A broker is an entity that facilitates trading in stock markets and settle our trades with exchange. Though basic function of a broker is to facilitate these activity, but when it comes to real life brokers are expected to do lot other activities also. These expectation defines the charges or the brokerage that a broker levy as a fee on every trade.
Understand your need
While selecting a broker, full service broker vs discount broker, one should ascertain that what is the need and expectation from a broker. It is primarily dependent on your knowledge and experience in markets along with your trading style. If you are a naive investor, then it is important to get the broker who may assist you, handhold you, guide you while investing in stock markets. Guidance is not about selection of stocks but also about information regarding various processes and regulation about financial markets. However, as seasoned investor or trader or even a person with finance knowledge, one will always look for the good deals. You should be clear about your personal requirement regarding value add services like research reports, dedicated Relationship Manager, etc.
Service Comparison ( Full Service Broker vs Discount Broker)
Full Service Broker
A Full service broker is a broker which is having membership of various exchanges and offer these services as per the customized requirement of customer. Apart from facilitating trading in exchanges, they offer dedicated Relationship Manager, Dealing on phone, Research Reports, customized back office reports, branch presence for walk in trade or service, etc. Such brokers operates through its network of branches and franchisee across the length and breadth of country.
Discount broker is a new breed of brokers emerged in last few years only. These brokers are usually present at single location and operates through online presence. The main mode of communication and servicing clients is online platform or calling desk. The clients are expected to trade on their own and expected to contact broker for any service, as and when required. The Discount brokers is the one which operates with a very thin team size and has a tight control on costs.
Just like the business model and servicing, they differ immensely in their pricing structure also. Mostly Full service broker charge as a percentage of turnover value as such a large trade will result into high brokerage and small trade will yield a small cost. However, there is always a negotiation factor involved where a trader or investor can seek a lower level of brokerage basis his/her trade volume or margin amount. In comparison, a discount broker normally charge fixed cost per trade or fixed cost per month which is irrespective of any turnover or brokerage commitment.
Most of the full service brokers charge 0.5% and 0.05% for delivery and trading turnover respectively. However, discount brokers always try to lure traders with their best offers. Few example are as Below
- Zerodha offer a flat rate or Rs.20 per trade or 0.01% whichever is lower. Also Zero Brokerage for delivery trasactions.
- RKSV again offers a flat rate of Rs.20 per trade along with free trade in delivery segment.
- Another broker Trade Jini offer Rs. 20 per trade with initial 50 free trades
- A Delhi NCR based broker, MyValueTrade offer trading in all segment for just Rs. 1000 per month or Rs. 10000 annually. One can also opt for per trade brokerage at a lowest price of Rs 10 per trade.
- A New Discount broker in Town, Fyers offers an online trading tools for better decision making at little higher cost @ Max. Rs.100 per trade.
Also See Best Discount brokers in India
If you need Research
If you need research and also wish to opt for low brokerages, then it is very much possible. SEBI has recognized various Investment advisor and Research Analysts who charges on monthly basis for providing customized services to suit your portfolio or trading style. Some of Investment Advisor also work on profit sharing basis with zero or very low monthly charges.
So now you can make your own choice among full service broker vs discount broker and get ahead in financial markets.