What is a Brokerage Firm? - Definition & Types

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  • 0:04 Brokerage Firms
  • 0:43 Full-Service
  • 1:23 Discount
  • 1:51 Online
  • 2:40 How to Choose
  • 3:27 Lesson Summary
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Lesson Transcript
Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

In this lesson, you'll learn about several different types of brokerage firms. You'll also learn about the different types of services each type of brokerage firm provides. Some even offer smartphone access!

Brokerage Firms

Meet Eddie. He invests all his extra money in the stock market. It is his way of saving up for retirement. In order to invest in the stock market, he needs to use the services provided through a brokerage firm. Brokerage firms are financial institutions that help you buy and sell securities. They act as the middle man between the buyer and the seller. Depending on the brokerage firm type you choose, you can either make your buys and sales via telephone, internet, or smartphone. Brokerage firms generally charge per buy or sell order with assisted telephone orders being more expensive. Let's take a closer look at the types of brokerage firms and their services before learning which one Eddie chooses based on his needs and preferences.

Full-Service

A full-service brokerage firm is a brokerage firm that provides a range of financial services in addition to allowing you to buy and sell securities. These firms can provide customers with financial planning services as well as consulting services. They can also provide trust services and wealth management services. Of course, the level of service you receive is reflected in the commissions the brokerage firm will charge on your orders. This is the most expensive type of brokerage firm. Also with this type of brokerage firm, you will be able to place your buy and sell orders over the internet or over the phone. However, if it's over the phone, the brokerage firm may charge an extra service fee for the additional assistance. Some firms also offer access via smartphones.

Discount

A discount brokerage firm is a brokerage firm that traditionally doesn't provide any financial consulting or planning services. Today though, many of these discount brokerage firms also provide access to online research services you can read through yourself to make your decisions. The commissions charged by discount brokerage firms are cheaper than those of full-service brokerage firms. Like a full-service brokerage firm, you can make trade over the phone or online. Some also do offer trades via a smartphone.

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