Full service brokers Versus Discount brokers: While making any buy or sell decisions in the stock market, one thing that we all worry about is brokerage costs. Any transaction in the stock market involves brokerage costs as brokers are the ones who act as the bridge between the retail investors and the stock market. Currently, there are 2 types of brokerage models in India that are distinctly different in terms of the services offered and features, charges etc. These are
Full Service Brokers:
These are the traditional brokers offering services that are more than just buying and selling facilities. They offer a wide variety of services such as research and advisory, investment banking, sales and asset management, Initial public offer related services, mutual funds, insurance and bond market services etc. Examples: India Infoline, Motilal Oswal, Kotak Security, HDFC Sec, Sharekhan and ICICIDirect.
These brokers generally do not offer any advisory services. They offer the ‘no-frills’ brokerage service for the traders who do not seek the market advice. They facilitate the necessary trading platform for buying and selling the securities at the least cost possible. These are best suitable for fee-conscious investors who are self-reliant in making investment decisions. Examples: Zerodha, Prostocks etc. These brokerage agencies charge relatively lesser charges than full; service brokers as the services are limited only to facilitation of trading platform.
Difference between Full Service Brokers and Discount brokers:
|Feature||Discount brokers||Full-service broker|
|Charges||Charges are much lower than that of full-service brokers. It is as low as Rs 20 per trade irrespective of the size of the order.||Charges are relatively higher and do not contain transparent service wise breakups. Charged as % of total trade value.|
|Number||In India there are very less number of discount brokers. The trends have shown that full-service brokers are jumping into Discount brokerage to capitalize the opportunities.||More than 10,000 full-service brokers are active in India.|
|3 in 1 a/c||Only trading account is facilitated. In recent times they are also offering de-mat account.||3 in 1 accounts that include trading account, demat and bank account are offered by many full-service brokers|
|Services||They offer only trading services. They don’t provide research, advisory and other add-on services||In addition to trading facility they provide other add-on services such as advisory, research reports, fundamental research reports, stock reviews and daily market reviews etc.|
|Network||Relatively less presence and operates mostly online.||They are Present across all the major cities and towns in India.|
|Suitability||These are suitable for investors who are well versed with the market and can make the market research on their own.||Suitable for investors with no market knowledge and who requires investment advisory services to exercise buy and sell decisions.|
|Minimum brokerage||No minimum brokerage is charged. Hence very suitable for small traders.||They charge minimum brokerage charges.|
Which one to Choose?
This depends on one’s personal needs and preferences. If you are someone who trades very frequently and can do the market research on your own then discount brokers are best for you. Discount brokers offer technologically advance trading platforms which make the regular trader’s business easier. Full-service brokers are better to go in case you are not well versed with the market and its dynamics.