Discount Broker vs Service Broker in India
Stock brokers can be classified into 2 types; Discount broker and Service broker. Choosing the right broker type as per your trading requirements will help you get good value for money. This article will discuss Discount broking and Service broking, the difference between the two and when to choose a discount broker and when to opt for a service broker.
What is a discount broker?
Stock trading has gone online. This has led to the emergence of a new breed of brokers called discount brokers. The discount brokerage firms are getting popular among the traders owing to their low, fixed brokerage plans wherein they charge a fixed brokerage fee irrespective of the trade value. For example, Bengaluru based top discount broking company https://zerodha.com/open-account?c=AUOUSS charges a brokerage fee of ₹20 per order on equity intraday. So whether your trade value is ₹10,000 or ₹10 lakhs, the brokerage charged will be the same
How does discount broking works?
Many retail traders wonder how discount broking companies charge low brokerage fees. It is because they work on a different business model than full-service broking firms. Unlike traditional brokers, they offer limited services at a cheaper price. They offer their services online and have a very limited physical presence which helps them save money on employees and infrastructure.
The services offered by discount broking companies do not provide research services like
Which Company to buy ,price to buy and how much to buy
Advantages and Disadvantages of Discount Brokers (Pros and Cons)
|Offer low brokerage charges compared to full-service brokers.|
Brokerage plan is fixed for all trader types- low volume or high volume.
Low transaction costs
|No research advisory and other investment services|
No branch services
No RM support
Top Discount broker in India
Zerodha with 1.5+ million investors & traders Clients
What is Service broking?
A Service broker (also called traditional broker) is a licensed broker that provides a range of services to its customers including research advisory, investment services, wealth management and Portfolio Management Services. Unlike online discount brokers, Service brokers offer their services both online and offline. They have branch offices in their area of operations, offer dedicated Relationship Managers (RM) to customers and employ a lot of people.
Service stock brokers have a dedicated research team that conducts technical and fundamental analysis and publishes various reports on stocks, companies and markets.
As they offer a range of services, the brokerage charged by them is higher than discount share brokers. They Charger in percentage
Advantages and Disadvantages of Full Service Brokers (Pros and Cons)
|Offers both online and offline services Offers research advisory and other investment services |
Branch offices at multiple locations
Dedicated RM support
|Brokerage charges are higher|
Brokerage plans vary for traders with high volume traders enjoying lower brokerage Transaction costs are higher.
Discount Broker Vs Service Broker
|service Broker||Discount Broker|
|Brokerage||Generally, charge a percentage of the trade value. Offer low brokerage for high volume traders.||Charge a flat fee on each executed order irrespective of trade value.|
|Brokerage Charges||0.25% – 0.75%||Generally ₹10- ₹20 per order.|
|Services||Broking Services, Research, Wealth Management, PMS, Depository services etc.||Best Trading Technology Platform ( No advice)|
|Suitable for||Frequent traders who need research and investment advisory services.||Online savvy traders who want to save on brokerage and have limited trading needs.|
|Physical Presence||Strong presence in areas of operations with branch offices in multiple locations.||Zero branch offices.|
|Customer service||Email/Call/Branch Servicing/Doorstep servicing etc.Generally, offer dedicated RMs for assistance.||Online services email/chat/phoneNo RM services.|
When to choose a discount broker and when to choose a service broker?
So how to decide? There’s no perfect answer to this question. However, to assist you in your decision, you can begin with a simple exercise to decide whether you need a discount broker or a full-service broker:
- Do you need research advice on stocks and other trades?
- Are you a high volume trader who trades in crores every year?
- Do you need assistance on trading?
- Do you prefer face-to-face customer support for addressing issues?
- You have no time to track markets ?
- Not Interested in analyzing the markets ?
If your answers to all of the question is a ‘Yes’ then a service broker will be the right choice.
- Do you know which company to buy ,price to buy and how much to buy ?
- Do you pick stocks on your own?
- Are you online savvy?
- Are you an trader & investor who don’t need much trading assistance?
- Do you want to cut down on your brokerage fees?
If your answers to all of the question is a ‘Yes’ then an online discount share broker will be the right choice.