Difference between Discount broker and Full service broker

Broker

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A broker’s invention is needed while doing any transaction in the stock market, be it a buy or a sell transaction. In order to choose the best broker, you need to understand the basics of the stock market. These brokers act as an agent between the stock market and market participants and are registered members of exchanges regulated by the Security and Exchange Board of India (SEBI)

Types of brokers

There are two main types of existing brokers in the Indian Stock market:

  • Full service broker

These kinds of brokers provide research, trading and advisory facilities in stock, commodities, mutual funds, IPOS, currencies, insurance, tax tips, etc. They operate out of many offices and branches across the nation which the clients are open to visiting if they have any sort of query.

They employ client-dedicated relationship managers, advisory, customised support, portfolio management services, wealth management services and financial planning services as well.

They charge a higher commission compared to the discount broker since the advisory makes up an important segment of their cost

The full service broker provides companies with fundamental reports as well as technical calls for traders and investors. Some of the full services have their own Demat and banking services account too.

For example Motilal Oswal, Angel broking, ICICI Direct

  • Discount broker

Discount brokers provide the cheapest, low-cost brokerage for buying or selling stocks compared to a full service broker. They have technology-based brokers with low operation costs. They only offer a trading platform to stock market participants but no advisory means.

When using a discount broker service, you are essentially on your own and do not have the added benefit of someone to offer you advice.

The discount brokerage firms charge a fee that is 60% lower when compared to full service brokers. They provide free online trading software to their customers as well.

For example Zerodha, Upstox, 5Paisa

Discount broker v/s Full service broker

It is crucial to select the broker which matches up best with your particular temperament.

  • In case you do not have a lot of money to invest in the stock market and can not afford to spend large amounts of money on fees and commission
  • You are someone who likes to do their own research and make their own investment decisions
  • And you are good at learning and adapting how to use different tools and resources that are available to you to get the insight you need to make a smart decision with your money.

In case you fall under the above-mentioned categories, you should go for discount brokers.

However,

  • If you are a beginner in the stock market and need a little support and guidance at every step
  • You have enough money to qualify for the slightly lower fees that some full service brokers offer to their top clients
  • You do not have much time to carry out research and identify a suitable trading opportunity

In case you fall under the above-mentioned categories, you should go for full service brokers.

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