Discount Broker

A discount broker is an entity in the business that helps investors buy and sell of securities on the stock exchange by charging significantly lower fees on as compared to a traditional brokerage firm, however, it does not provide financial advice and support.

There are some risks involved in the process in return for low brokerage. But all types of investors can access the market with their help. However, there is no biased of personal interest-based problems in trade execution. It is important that all investors should understand the process before investing.

Key Takeaways                                                               

• A Discount Broker is an entity that helps investors buy and sell securities on the stock exchange by charging significantly lower fees than a traditional brokerage firm.
• A Discount Broker generally does not provide financial and market analysis and financial advice and support, as opposed to brokerage firms and full-time brokers that offer financial advice and support.
• There are over 10 Discount Brokers in India. Their services centrally include a platform for buying and trading various securities without tips and advice about the concerned securities.
• While Discount Brokers can significantly reduce the cost of trading for investors, they need more support from solid financial experience-backed trading and investment.

A discount broker is an entity or a person (in the case of an individual) who offers trading services and execution of trade at low costs, sometimes even the smallest fraction of the original fee. Still, it does not provide any advice, consulting, or research-related services.

In the securities market, a broker helps clients buy and sell securities in the proper exchange. Before the advent and advancement of discount broker firms, only the people who are affluent were able to afford a broker so as to access the stock market because of high brokerage charges. But with the introduction of discount brokers and them charging only a fraction of fee as compared to the full-service brokers and other counterparts, there is wider access to the markets allowing the modest investors equally as the wealthy investors

Even online discount broker services was possible because of the development of the internet and online services like electronic trading.

But the investor needs to be vigilant and check discount broker rankings and about the investment strategy while opting for a broker to carry out the buy and sell orders because the discounter would not offer any planning, advisory, expert guidance, and research services.

The investors usually do not communicate with the broker because clients are provided separate accounts for order execution.

Since these brokers need not provide high-value advisory services for high net worth individuals, the cost of operations would be very less. They charge commissions and flat fee irrespective of the trade volume. The discount broker fees may seem to be very less when compared to the traditional brokerage values, but due to high liquidity, many traders may invest without the proper perspective of the markers, thus making money for discount brokers.

Let us look at the list of discount broker firms.

1. Fidelity Investments
2. Robinhood
3. Charles Schwab
4. R K S V
5. SAS Online
6. Zerodha
7. Wisdom Capital
8. Angel Broking
9. ICICI Direct
10. Kotak Securities

Let us look at the advantages of normal and online discount broker.

• Lower cost is one of the greatest advantages of discount broking, which is one of the major reasons why discount broking would be preferred.
• Investors with low capital previously did not have access to the markets. After the introduction of a these broker, they could invest by paying low discount broker fees and brokerages.
• There is no fear of biased service as they do not offer any investment advice. They have no hidden agenda or interest vested. They just offer the service of buying and selling, i.e., executing a trade.
• There would be no interference in investment decisions.

It is always necessary to check discount broker rankings before opting for them due to the following reasons.

• The customer service is very minimal, and there is very low or no interaction with the live broker.
• The commission is not the only way the brokers make money. There exists a concept called hidden costs.
• Discount brokers do not have the policy of providing margin money against fixed deposits mutual funds and shares.
• There is an absence of investment advisory, consulting, and research service, which makes it suitable only to investors who have done their own research.

A full-service broker is a stockbroker who/that provides investment advisory services, portfolio construction, and the like services in addition to carrying on trade and facilitating the carry of transactions.