Purpose

• No member of the public can walk into a stock exchange and buy shares of a company. Only officially regulated brokers have this ability. They act as an intermediary between the stock exchanges and the investing public. They charge a commission in the process, usually on a per-share basis. Serious investors seek brokers that suit their investment style and desired level of control. Brokers exist for those with no knowledge of how to invest and also for those who want total management of their portfolio themselves. This gives the public options on the type of access they get to the stock market.
  
  

Discretionary Accounts

• When an investor opens a discretionary account, she is providing the broker with the permission necessary to buy and sell securities on behalf of the client without her approval on each transaction. She simply hands over the money and the broker starts working with it. This is a common solution for investors who do not wish to be actively involved in their portfolios. While this could be an advantage for some, it is important to understand the broker's incentives before choosing this type of an account. Brokers are paid on commission from each trade. As long as they trade shares, they make money, even if the account loses money due to poor stock choices. For this reason, clients of discretionary accounts should frequently check their brokerage statements to ensure satisfaction.
  
  

Full Service Firms

• Some brokers do more than just provide a means for buying and selling stock. They may also house entire departments dedicated to stock market analysis to provide clients with their own proprietary research and advice. Additionally, a full service firm may provide wealth management professionals and financial planning services. For those seeking these perks, a full service firm is often a good choice. Discretionary accounts are common in these firms, but there may be high management fees. Thus full service brokers are usually reserved for those with substantial investment capital.
  
  

Discount Firms

• "Discount" and "Deep Discount" brokerage firms service clients who are comfortable with a hands-on approach to managing their own portfolios. These firms usually do not provide much research or investment advice, and many will not offer discretionary accounts. Thus clients simply use the firm to make stock transactions that they independently choose on their own. Discount brokers do not charge the large management and research fees of a full service firm, and their commission costs may also be lower.
  
  

Online Trading

• The popularity of the Internet has made it possible to completely manage your portfolio online. Online brokers provide access to the stock market through a website or separate software download. They usually do not provide much human interaction and rarely offer meaningful investment advice. These platforms exist solely for the purpose of buying and selling stock without the need to pick up the phone. This is both an advantage and a disadvantage. Some investors find the control they have on their own accounts overwhelming. Unlike a seasoned broker who may understand the ebb and flow of the stock market, an individual with full control may be tempted to sell a stock even after a very modest decline out of fear and ignorance. Successfully managing your own portfolio can be a considerable challenge.