What it is:
A full-service broker executes trades for clients, but also provides research, advice, retirement planning and tax assistance.
How it works (Example):
There are two general categories of brokers: discount and full-service.
In contrast to a discount broker, who only executes trades for customers, a full-service broker also provides service and expertise in wealth management services -- such as tax assistance, retirement planning and investment advice. This expertise can be extremely useful to investors with complex financial situations.
Why it Matters:
The expertise of a full-service broker allows you to outsource decision-making to the broker when you don't have time to stay updated on complex issues like estate planning and tax preparation. But the benefits and peace-of-mind provided by a full-service broker comes via higher commission than a discount broker.
Discount brokers are often the better choice for investors who perform their own research and don’t rely on outside guidance. Discount brokers are also a great choice for active traders because the commissions are much lower (hence the name, discount broker).
With the prevalence of online trading, low trading commissions, easy-to-use interfaces, and a broad range of educational materials are almost all that any trader could need.