Online or full-service broker?
For a $10,000 trade you can expect to pay $20 to $40 in brokerage when using a discount or online broker. If using a full-service broker you can expect to pay $150 or more. The question for the individual investor is whether the personal attention, advice and research-related services are worth the extra brokerage. Referring to Online brokers as ‘discount brokers' is no longer appropriate as they offer more than just reduced brokerage fees. Online brokers are expanding the range of services they offer over the internet and are encroaching upon full-service brokers in areas of float allocation and distribution of research.
Company research reports, stock recommendations and analyst reports, once the domain of the Full Service Broker are under threat from online brokers. While this research is ideally distributed over the internet via Online Brokers, questions of which research is suited to the needs of an individual investor are best answered by the Full Service Broker.
Advisory services offered by full-service brokers range from recommending investment strategies and interpreting research in the context of your goals to advising when to make your trades given market conditions.
Most full-service brokers act as underwriters for companies listing on the ASX, although this doesn't guarantee that you will receive an allocation. Online brokers have already taken allocations from floats to distribute to their members and will have an increasing impact in this area.
Published: 5 June 2005