Types of Brokerage Firms

When deciding to start investing in stock, one should always take into consideration what type of brokerage firm to use. Like choosing banks, you want to look at each firm’s products and all associated fees. There are typically 2 types of brokerage firms, full service and self service. Well what’s the difference?

• Full Service brokerage firms, such as Goldman Sachs and Merrill Lynch, typically charge higher fees. Although their services are more costly, since they offer advice, it takes the annoyance out of having to pick your own stocks. They will assign you a financial advisor who will identify your investment goals and risk tolerance (among other things), and prepare a portfolio which will best match your investment objectives.
• Self Service brokerage firms, such as E*trade and Scottrade, typically charge lower fees. However, the burden to pick stocks and manage your portfolio falls on you. You will receive no financial advice from the firm, hence the “self service” concept.