What is a discount broker?

A discount broker is somebody (typically a stock broker or brokerage firm) that charges a small fee on orders they carry out for you. An order is the process of submitting a request to buy or sell a stock. Below are the main pros and cons of a discount broker.

Pros

  • Small fee (typically less than $10 per transaction)
  • Simple

Cons

  • No additional services

As you can see, the disadvantage to a discount broker is that the only thing they do is carry out the order for you. On top of carrying out the order, a full-service broker offers investment advice, retirement planning, tax tips and more for their clients. But remember, those extra services come at a price. Depending on your needs, it may be in your best interest to consider a discount broker. They are simple and relatively inexpensive. Just be sure to research your investment choice!

 

Written by: JT Donahue, Financial Wellness Peer Educator, University of Illinois Extension, 2017

Reviewed by: Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension, 2017