Full-Service Broker refers to stock brokers who offer a large variety of add-ons services besides facilitating buying and selling in stocks. The services may include research reports, advisory, tax tips, a relationship manager, retirement planning and etc.
Apart from shares they also provide a variety of products such as debt instruments, mutual fund schemes, IPO, FPO, loans product, insurance, and etc. The commission charged by the full-service broker is higher than that of a discount broker. Some full-service brokers have their own banking and de-mat account services too.
The full-service brokers generally provide expertise services for those who lack time to stay updated on complicated financial issues. Some full-time brokers also offer customized support, portfolio management services, financial planning services, and services relating to wealth management.
An important question arises that who in particular requires services of full-service brokers. The following section discusses this. One must keep in mind before selecting a broker that in actual what kind of services are required at all by him/her.
A full-service broker – for whom?
Over 10,000 traditional retail full-service brokers are operational across India. They act as advisors to their customers and at the same time work as salesmen for various financial products.
Broadly speaking the services of a full-service broker suites the following category of investors/traders –
An investor who is going to begin and needs guidance at every step
High volume trader looking for higher margins and margin funding. Personal relation with the brokers matters much in such kind of services.
Investors and traders who are interested in call & trade or want to trade by physically visiting any branch
Those investors willing to invest in other financial products through the broker like mutual funds, IPO, debt instrument etc.
Benefits of full-service brokerage
The following are the important benefits of using services of full-service brokers.
Proper and timely advice and guidance – Full-service brokers provide personal attention to their customers through account representatives, especially known as relationship managers. Customers generally have to disclose information relating to their finances and financial goals. And based on the customer’s preferences the representative/managers make recommendations about stocks, funds or other instruments.
Customised research access – Full-service brokers provide access to investment research products. These research products give in-depth information and analysis on various investment instruments.
Help to optimize investment objectives – The relationship managers of such brokers remain in personal touch with the customers. And they also know the investment goals of customers. This helps them in providing advice and replies about specific investments and strategies of the customers. Hence, help in accomplish wealth-building goals.
Drawback of full-service brokerage
The following are important drawback of full-service brokers –
The relationship managers are salespeople. They generate brokerages and fees from customers. And their compensation is based on their ability to produce revenue. So customers must remain cautious every time they deal with such representatives of stock brokers.
Generally, these managers make suggestion or recommendation to buy or sell any financial instrument. Customers must assure before taking action on such recommendation that is it a valid recommendation. A good advisor always justifies such actions. If customers don’t understand or agree then they must not take blind action on such advice.
When a customer hand over the decision-making authority on their behalf, every chance are there to turn to possible negative. Keep the decision making authority with yourself. If you don’t understand things then first make yourself aware about the concepts and workings.
Sometimes brokers engage in churning. Churning is buying and selling stocks for the purpose of brokerage generation. It is good for brokers but bad for clients. So keep an eye on your account and if found any such activity then take possible action so that you need not have to pay unnecessary brokerage.
How to choose a full-service broker?
The best approach is to make a list of facilities and then to match it with the offerings from the full-service brokers. Some worth points are described below.
Costs –Compare brokerage and other fees that are being charged. The broker must compensate more charges with additional facilities and services.
Facilities – Evaluate the offered facilities. Choose the one whose offered facilities matches with your requirements. If you are a trader chose with features with day trading facilities at competitive cost. On the other hand, if you are an investor choose the one with the low brokerage.
Minimum trades – Always check for clause or sub clause about minimum trades. If you are not a trader discusses with the broker not to levy charges on this. In case of 3-in-1 accounts, there are rules for minimum balance on the saving account. A 3-in-1 account comprises of de-mat, trading and a saving account.
Investment options – Besides stocks, if you are interested in mutual funds, IP, FPO, insurance products or other alternative investment products, you must check offered products. Also, check and compare costs associated with such options and do not forget to negotiate with them.
Research – This is an add-on service that helps customers read research reports on companies or sectors of interest. Clients can access data on companies as well. Traders can receive trading tips as well on chosen instruments.
Customer service – Always consider reviewing customer reviews online on social media and discussion forums before your final decision on selection. These comments give deep insight on the quality of services provided by brokers.
Local office – Local branch or a sub-broking office of the broker under consideration is always preferred in case of selecting a full-service broker. You can visit the office in case of any doubt.
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