Every beginner in the world of investments has two choices between a full-service or discount broker. Cost-effective and do-it-yourself discount brokerage or the pricier and service-oriented full-service brokerage, which one should you choose? Well! Before making any decision, it is wise to understand each of these options in-depth.
Full-Service Brokerages
As the name suggests, full-service brokers not only facilitate buying and selling of a stock or bond or other financial instruments but also offer other services related to financial management. These include financial planning for life goals, investment, tax advice and regular portfolio updates.
Personalised recommendations and services are offered, which carry a higher fee in addition to steep brokerage, 0.3 to 1%.
Some full-service brokers offer portfolio management services. Generally, it ranges between 1 – 5 percent of the total assets managed. For instance, maintenance of a 10, 00,000 portfolios would cost somewhere between INR 10,000 and 50,000 annually. Some full-service brokers with portfolio management services charge 20% fee on profits generated. In the long run, this amount may dig into your profits and especially savings for retirement.
Traditional brokerage fees should be considered if you have a large amount to invest, and you are completely clueless about investing in equities and related products. Further, this type of service also suits those who may want a bit of hand-holding before they learn to be on their own in the stock market.
Discount Brokerages
Choosing a discount broker in India is better if you want to take baby steps into the world of stock investing and trading. It allows you to start a trading account at a minimal fee and charge a nominal fee on each trading order completed successfully. Though personalised advice is not a part of the range of services, good online trading platforms, free educational tools and resources to help you take better investment decisions. Contrary to full-service brokerage services where an expert trades on your behalf; here, the ball is in the investor’s court. He or she can execute a trade online automatically through mobile apps or desktop trading platforms. In case of issues and complaints, you may reach out to customer care services, a service which is offered free of cost by top discount brokers in India.
Account maintenance fee is charge annually by full-service brokers or discount brokers, depending upon the type of account you own. For example, the fee for NRI accounts is slightly higher as compared to regular accounts. The investor should also check the minimum opening balance requirement. Most online discount brokerage platforms allow opening a zero balance account, while others may need a stipulated amount to open an account. One should also check if there is any penalty charge levied in case your balance falls below a certain amount.
These are just a few points to remember while selecting a broker. All in all, the type of discount broker you should choose depends on your financial needs and goals. If you need one-on-one guidance and interaction on a regular basis, going the traditional way is a viable option. On the other hand, if you are a fee-conscious professional or a newbie, nothing better than starting with an online trading platform.
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