It is true that although you can choose your own investment, you must use a broker to execute orders. You do not need to trust their advice, although it may be helpful. You can make your own choices, but you’ll still need to invest in their services. There was a time when you did not have a choice about what type of stock broker to use. There was only one type of broker, full service brokers, and they were dominating the market. The commissions they requested for their services were very high but this was the industry standard. This contributed to the idea that the stock market and stock market investment were beyond the means of the average person and only for the wealthy.
The initial loss of market control by full service brokers occurred in 1975 and discount brokers emerged. They have charged a fraction of the fees charged by the full service brokers, and thus they are very successful in the market. They provided the same great services, but were within the reach of the average individual, as the cost was much lower. Another great innovation was the introduction of the Internet. This was a great innovation as there was an increase in business efficiency as a result.
The overall effect of all the changes in the stock market was that people now had access to a lot of information that was not available to them before. However, there is debate over whether these avenues have in fact improved investments and made better investors. For people doing their homework and searching for the truth behind the hype, the answer is definitely yes. Investors can now choose the type of broker they need from the available range.
There are four classes of runners. These are a discount / online broker, a discount advisory broker, a full-service broker, and a money manager. A discount / online broker is basically an order provider. They do not provide advice and will not tell you when to buy or sell stocks. Research tools and other account management tools may be available, but the choice to invest in the stock market is entirely up to you.
The discount / online broker variation that helps clients is the nest type. They don’t offer complete consulting services, but they will have more research sites than taking requests. They will provide newsletters and investment advice, but they will likely not recommend specific stocks. You are not completely alone with this option, but you still have a lot to do to determine the best equity investment.
A full service broker will provide recommendations on specific actions and the broker will also access your financial situation to determine your investment needs and options. This service is suitable for the investor who has no interest or time to make his investment decisions.
The money manager is intended for the investor with a large investment amount. This broker will deal only with significant portfolios and will invest and manage the entire account for a percentage of the assets under investment. This option may be expensive, but it pays off in the long run.
Whichever option you choose, ensure that it suits your purpose and is covered by the Investor Protection Company. Ask about backups and other options in the event of technical issues and make sure your broker has your best interests in mind.