Definition of Service Brokerage
A brokerage is a licensed company or individual (broker) who buys and sells stocks for investment clients. A service brokerage, also known as a full-service brokerage, will execute stock market trades for you, while also providing research and investment advice.
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Function
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Service brokers should not be confused with discount brokers who offer fewer services along with executing trades or deep discount brokers who only execute trades. You can work with a service brokerage to create short- and long-term investment goals, a retirement plan and tax strategies.
Significance
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In exchange for working with a full-service broker, you will pay a significantly higher transaction fee for each stock trade, as these brokers earn their living through commissions. Ideally, a service brokerage will provide you with sound, up-to-the-minute research and profitable investment plans, using your money to create wealth and a solid retirement for your future.
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Warning
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A full-service broker may charge as much as $75 for each trade executed, and it goes without saying, the more trades they make, the more money they earn. If it seems your broker makes many trades without any apparent results, she could be "churning," which applies to service brokers that execute trades with the sole purpose of generating commissions.
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