The equity and commodity market plays a vital role in Indian economics. A large section of India is engaged in trading. Therefore, brokers are in high demand always. The main objective of trading is to get to maximize profit. Hence, one should be careful about choosing a broker. The article will cover the distinction between Discount Broker vs Full-Service Broker in India.
What are the 2 Types of Brokers?
There are certain criteria for choosing a broker, such as services and features offered, research and investment tools, minimum opening balance requirement, cost of commission and fees. In India, brokers are registered under SEBI. Generally, you will find two categories of brokers, such as full-service brokers and discount brokers.
Discount Broker vs Full-Service Broker-Key Differences
There are some key differences between a Discount Broker vs a Full-Service Broker.
Brokerage
Their charge is based on each executed trade in percentage while low-cost broker offers a flat fee on each trade executed.
Brokerage Rates
Generally between 0.3% to 0.5% and in low-cost rates is Rs.20 per trade.
Investors Quality
Investors who want advisory for their investment should go for full-time and those who can research on their own or have a financial advisor can go for a low-cost broker.
Primary Service
Along with the trading platform, the full-time broker provides advisory for investment but in the low-cost brokerage firm, the advisory is not available here.
Research and Analytical Department
Full-time brokers have their own research and analytical department while in low-cost brokerage, there is no such facility.
Customer Services
Face-to-face customer services are available while low-cost brokerage only has online facilities.
Example of Brokers
Sharekhan, Motilal Oswal, ICICI Direct, HDFC Sec, etc are examples of full-time brokerage firms while Zerodha, Pro stocks, RKSV, 5Paisa, etc are low-cost brokerage firms.
Now, let’s focus on the low-brokerage firm.
Pros and Cons of Using Discount Broker in India
Advantage
- Lower fees or brokerage charges for trading.
- Investors have more control and flexibility in their trading and Demat accounts.
- The brokerage bias section is nil here.
- Traders have enough access to online tools.
- Monitoring opportunity is available.
Disadvantage
- No advisor is available here.
- As it is only online-based, traders sometimes face problems.
- They don’t have their own research team.
FAQs on Discount Broker vs Full-Service Broker
This depends on the investment needs of the investor. Discount brokers typically charge lower commissions and are best suited for long-term investors looking to make fewer trades. Full-service brokers provide more personal assistance, research, guidance, and suggestions and they can be beneficial for traders with a variety of different strategies.
Zerodha provides discounted trading services as well as additional features such as charting tools, news feeds etc., so it could be described as both a discount and full-service provider.
A deep discount brokerage offers ultra-low commission rates but usually does not include any additional services such as personal customer support or comprehensive analysis/educational resources available from typical full-service providers. On the other hand, full-service firms tend to charge higher trade fees but provide access to more advanced tools including personalized advice tailored directly to your financial goals & objectives.
The main disadvantage of using an online discount brokerage is that you may lack access to more personalized advice which can help immensely when placing complex investment orders in particularly volatile market environments. Additionally, these types of services do not offer more traditional custodial banking capabilities often provided by banks & debit card options associated with regular checking accounts at top-tier banks.
The Final Thought
This is a brief overview of the low brokerage firms. You have understood the key differences between a discount broker with a full-service broker. Nowadays, discount brokers are more popular among investors. But, it is up to you whether you choose low-brokerage firms or not.
