Investing through a full-service brokerage
Full-service brokerages offer a wide range of financial services, including instrument research, tax tips, retirement planning and much more. These services cost a lot of money for the company. So these brokerages charge more commissions at each trade to cover they costs. Trading with a full-service brokerage is more useful for that investor, who has got capital and work a lot, so they do not have time to research for information. The cost of a trade at a full-service brokerage can be 20 times more than at a discount brokerage, so the investor must think about the usefulness of the provided information. Is it so much worth?
Minimum capital
The required capital to use a full-service brokerage is not determinated, but usually it is more effective to use a full-service brokerage when the investor has got more than US$200.000 to invest. The costs of these brokerages are really high, so the invested capital should be a lot more than for example at a discount brokerage. Moreover, the time cost of the investor must be high, too. It should be more worth for the investor to pay for the extra services of the company than to do it by yourself.
Commissions and fees
Full-service brokerages usually do not charge for the extra services directly. The extra services are paid through the trading commission, so when for example a discount brokerage charges maximum US$20 for a trade, a full-service brokerage charges 150$ or more for a trade. The investor must know his type of person. He must decide whether to trade as an active trader or to be a buy and hold investor. If he is a buy and hold investor, who does not have time to do research and analysis, a full-service brokerage is the right brokerage firm for him.
Personal financial management
Full-service brokerages offer a personal financial management, which include retirement planning, taxation analyses, financial analyses, life insurance needs analyses and much more. But these services are available only for those investors, who have a minimum account balance of a few million dollars. For example, the investor has got US$1 million and buys an investing fund. The entry fee they receive is 1% (not too much regarding to several investing funds), the full-service brokerage earns US$10.000. From this amount of money the company can lightly pay the fees of the workers, who do the extra services.
