The Difference Between a Stockbroker and an Online Brokerage Account

Image result for StockbrokerWith so much access available on the Internet today, the concept of a full-service stockbroker when investing seems like a nostalgic luxury to most people. In addition, many brokerages are scaling back their services to streamline costs, providing personal service only to accounts worth more than set amounts of money, usually $50,000 or more. As a result, many average investors today deal with online accounts and performing their own research electronically.
A full stockbroker involves a licensed financial adviser and broker who performs trades for investors on public markets. However, trades are not the only thing such and advisor provides as a service. His assistance also includes professional advice, research, proactive searching of new investments that fit an investor’s goals, and aggressively managing an account to meet the investor’s targets. The amount of control a broker has depends on what the investor agrees to. Some brokers have complete trade control over their clients’ accounts while others can only advise and suggest, making trades only with the client’s approval each time.
Of course, full-service stockbrokers don’t work for free. Similar to trading accounts, they are paid a fee on every trade. This includes purchases and sales. Alternatively, brokers can be paid a percentage of an account’s worth over a given time period, similar to managers of mutual funds. While this expense does eat into the profits of a portfolio, if the broker is doing his job and producing profits the minor cost shouldn’t matter much.
Particularly for those with large portfolios to manage, a stockbroker makes sense. Just keep a large portfolio in a state of break-even and not losing any money can be a fulltime job in itself. The additional research that must be performed each day can take hours for each stock involved.
For small to medium-size portfolios it makes sense that a stockbroker would be cost-prohibitive. The amount of profit made can be eaten up by as much as half due to the expense of an active broker. Such accounts can instead opt for a quarterly review with a financial advisor to get a snapshot direction of how to change path. Such advice can be very helpful, particularly to those who don’t have time to research much but still want to invest and earn more than bank savings rates.
Keep in mind, though, regardless of whether a portfolio is self-managed or directed by a stockbroker, it is investing with risk. No stock account is guaranteed to produce a profit, even with direct handling by a licensed stockbroker.

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