Online Brokers Vs. Traditional Brokers
Brokers are engaged by clients to buy and sell stocks, futures and other securities. They are regulated by the U.S. Securities and Exchange Commission. Traditionally, stockbrokers have met and interacted directly with clients. Recently, however, the discount online brokerage has emerged as a trusted and reliable way of trading securities.
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Account Minimums
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Many traditional brokers such as Merrill Lynch require account holders to maintain high account balances, often tens of thousands of dollars. Many online firms do not require a minimum balance.
Transaction Fees
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Many traditional brokers maintain high transaction fees, often $20 to $45 regardless of the size of the transaction. Trades made through an online broker can often save up to 80 percent in fees.
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Research and Advice
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If individuals prefer or need to receive investment advice, they will be best served by a traditional broker. Investors who make their own decisions will not be required to pay for such services through an online broker.
Additional Products
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Traditional brokers often provide other financial products that may be of interest to clients such as credit cards, mortgages and checking accounts, offering a one-stop shop to clients. This is typically not the case with online brokers.
Additional Information
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Financial publications such as "Kiplinger" and "Money" evaluate both traditional and online brokerages on an annual basis, allowing consumers to fully analyze firms within each category.
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References
- Photo Credit Image by Flickr.com, courtesy of Perpetual Tourist
