Stock Brokers - Types
A stockbroker is a salesman.
He works for a stock brokerage house (like Merrill Lynch, Fidelity Investments or Charles Schwab). The broker's job is to carry out your transactions. Brokers are paid by salary, commission, or a mix of both.
Discount Brokers. Discount brokerages just transact your trades with no frills. They charge considerably lower fees. They also often offer online order entry services. They don't solicit, and they aren't paid commissions. Discount brokerages make money by doing business in volume. They compete mostly on price and the 'reliability' of their service. Live brokers at these brokerages are usually paid a fixed salary to execute your trades.
Full-Service Brokers. These brokers tend to offer a wider variety of financial products, as well as investment advice and research. Their fees are higher. They solicit business and are paid mostly by commission. This means that they are paid by by how often you trade. This means that it is in their interest to have you trade as often as possible.
What kind of investments do you want? Every brokerage will give you access to the most commonly traded stocks. You may not have access to every mutual fund on the planet or to thinly traded issues.
If you want access to most popular IPOs, you may need to use a full-service broker, even if you're a keen do-it-yourselfer.
How much do you have to invest? The more money you have, the more options you'll have. Unfortunately, some discount brokers that used to cater to the smaller investor now charge fees.
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