Types Of Online Brokers

Do you know that there are many different types of online brokers? A simple search engine search will bring up the massive results of companies and options that are out there so how do you even begin to know which one to go with? All online brokers are not the same.

Different brokerage services offer different features. Before you can begin to understand the types of brokers and which one you need to meet your needs, you will need to know what the different types of brokers are.

There are different types of brokers that offer different levels of assistance and services. There are two main types of online brokers they are regular brokers and broker resellers. A broker that will deal with their client directly is called a regular broker. Broker resellers are actually an intermediary that goes between you the client and a larger broker company.

There are four basic categories of online brokers that you can find. We are going to list and describe them below so that you know what you are looking for in the wide spectrum of online broker options.

1. discount brokers/online brokers
2. assisted discount broker
3. full service broker
4. money manager/financial advisor

So what are these 4 different types of brokers, what are their specific jobs and how do you know which one you need for your online trading usage?

1. Discount/Online Brokers

The online discount broker is basically just an order taker. You put in the trade that you want to make and they place it for you, typically online although some take orders over the phone as well. You will not receive help or advice from your discount broker. They are simple and to the point and you do not get any “extras” as you are not paying for them. They won’t help you will your stocks or help you pick a stock and if you are dealing online, you most likely will never even speak to any of the employees.

Keep in mind that while discount brokers will save you money, it will be at the expense of little to no assistance whatsoever. You may find some discount or online brokers that offer assistance with research but it is typically through a third party and will cost you more money through that third party.

2. Assisted Discount Broker

An assisted discount broker will offer you a bit more than a non-assisted online broker. Exactly how much help they give varies and you will need to check with them first to see how much assistance a particular service offers you. They offer varied services which don’t leave you completely on your own but don’t provide a full service either.

Their websites will usually have more information on them, more ways for you to get in contact with someone and they may also have newsletters and other methods of giving you investing assistance. They will typically provide you with general information, not specific stock suggestions.

3. Full Service Broker

A full service broker will provide many of the same services as a traditional offline broker. They will give you advice and recommendations on specific stocks. They will be available to give you suggestions, advice, hints, tips and assistance through the trading process. They will begin with an assessment of your financial situation to help determine your needs and what investment opportunities are best for you.

A full service broker will help put together a portfolio that meets your needs and desires and your financial abilities at this time. If you don’t have the time for putting into your stock trading and investment opportunities, this is a great idea as they will do all the hard work for you. You just need to make sure you are choosing someone who is qualified and able to help you properly

4. Money Manager/Financial Advisor

A money manager or financial advisor handles specific needs. They may sometimes also be called by other names. Basically they handle larger portfolios such as those investors dealing with large sums of money to be invested. Money managers are trained to take responsibility for investing and managing large portfolios. A good money manager will be expensive but for obvious reasons, well worth it.

You will have to consider the different types of brokers and choose one that meets your needs the best. It will of course, be up to you which one you decide to choose but whatever you choose you should make sure that you follow the proper precautions to protect yourself when trading.

Make sure the broker you choose is covered by the Securities Investor Protection Corporation which will protect your assets in a brokerage account for up to $500,000 in the event that the firm fails. This insurance is very important, especially with so many online brokerage firms these days.

Remember that the insurance does not cover you in the event of trading losses, even if the broker suggested the trades. You are still ultimately responsible for those losses. Make sure that whoever you decide, you feel comfortable with them and that you can trust them to handle something as sensitive and your money and investments.