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Until recently, using a stockbroker was the only way to get access to the stock market, but that is no longer the case. The development of technology has given traders and investors more flexibility to choose an approach that works for them, their budget, and their financial goals. Sites like the Motley Fool are designed to help beginner investors learn everything they need to know to build up a balanced portfolio. Keep reading to learn more about what a full-service stockbroker is and some of the pros and cons of using one.
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What Is a Full-Service Stockbroker?
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Full-service brokers are licensed financial specialists who offer industry expertise and a wide range of services to their clients, such as investment facilitation, tax advice, retirement planning, estate planning, and budgeting tips. They do all of this to help their clients develop long-term financial plans that allow them to reach their goals.
Pros of Using a Full-Service Broker
The experience and expertise of a full-service broker can be beneficial, especially if you're new to trading. Some of the advantages include:
- They provide personalized advice and guidance: One of the major benefits of working with a full-service stockbroker is the level of personal attention they give you. Your rep gets to know your finances and financial goals personally so that they can give you the best recommendations.
- They handle your investment decisions: If you authorize a discretionary account, full-service brokers can handle all of your investments on your behalf, allowing you to earn money without having to stress over making the right trades.
- They help you reach your financial goals: When you give your full-service broker information about your finances and investment objectives, they can build strategies based on your unique needs and goals.
- They give you access to research: When you hire a full-service broker, they often provide you with access to their research department, meaning you can get your hands on in-depth analyses and information about prospective investment opportunities.
Cons of Using a Full-Service Stockbroker
Despite the positive aspects of using one, you don't need a broker to successfully invest in the stock market. In fact, using a stockbroker has its fair share of challenges, such as:
- There's a risk they're churning: Full-service stockbrokers work on a commission, meaning they profit from each trade. Churning is the practice of purchasing and selling shares just so a broker can make commissions, which can have a significant impact on your money.
- You may not like their investment decisions: Though allowing a professional to handle your investments can be nice, it's still risky to give someone else the ability to use your money. If one of their investment decisions causes you to lose wealth, you'll be stuck feeling powerless and dealing with the consequences.
- The cost of a broker can impact your profit: There are various fees and commissions associated with working with a full-service broker, and they are much more costly than if you were to use a discount broker or go at it on your own. This can eat away at any profits you make.
Regardless of whether you decide to use a professional or go broker-free, it's worth researching your options so that you can determine the best choice for you and your financial goals.