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{Listen to the audio of this section and be sure to review your workbook action items at the bottom of this page}

When it comes to buying stocks and funds, you are going to need a broker a.k.a a brokerage firm to manage the transaction.
 

What is a brokerage firm?

A brokerage firm is a financial institution that manages or facilitates the buying and selling of securities e.g. stocks, bonds, funds etc, between buyers and sellers. They typically charge commission fees on trades and can provide you with up to date research, market analysis and pricing information on various securities. Examples of brokerage firms include Vanguard, Fidelity, Charles Schwab, T.Rowe Price, Betterment, Acorns etc.


Types of brokers

There are 3 types of brokers (and broker services) that you could leverage to invest in stocs:

 
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A full service broker

A full service broker is basically a one stop shop for all of your investment needs. A few things to note about them:

  • They offer a wide range of financial planning services and advice via one-on-one’s with financial advisors including what to invest in based on your objectives and risk tolerance.
  • They most times receive commissions on your trades so you need to ensure they are acting in your best interest and not just to get commission (being able to have an informed conversation with them, like what this course is teaching you, can help!)
  • They usually have they high fees for the services they provide.


A discount broker

A discount broker offers their services at a considerable discount to a full service broker based on what they offer. A few things to note about them:

  • They don’t offer financial planning advice and as a result are able to charge reduced trading fees.
  • They might have financial advisors available to provide general non-specific advice 
  • They have human support to help you place orders.
     

Online only brokers A.K.A Robo-advisors

Robo advisors are basically automated online financial advisors that provide financial management services and advice using algorithms and technology without the need of human financial advisors. A few things to note about them:

  • They provide customized recommendations of diversified investments based on your individual situation and use software to manage your investments without the high cost of a real life advisor. 
  • Some robo advisory firms also provide the option to get advice from a real person at an additional cost.
  • They typically have very low minimum investment requirements, low fees, regular and automatic portfolio rebalancing and automated investing.

Can these different types of brokers do similar things?

It is common to find brokerage firms that overlap the services they offer. For instance some brokers offer full service and discount brokerage services in one place and many of these brokers are also adding on robo-advisory services.

For instance: Vanguard, Fidelity, Charles Schwab are examples of full service brokerages while Betterment, Wealthfront, Robinhood and Acorns are examples of robo-advisors. Each of these brokers offer other services in addition to their core offerings.
 

The case for discount brokers and robo-advisors

Due to the low costs, many people choose to go with discount brokers or robo-advisors and can be very successful at investing by being clear on their objectives and their risk tolerance and by spending time to do frequent research to stay on top of their investments.


Prefer to work with a financial advisor?

Working with a financial advisor is a decision that really matters because this person is going to be giving you advice and recommendations on financial products that will have a major impact on your finances long term.


How to find the right financial advisor

Here are some tips to help you find the right financial advisor:

 
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  1. Ask for recommendations for great advisors from people you know
  2. Research your potential candidates - you can look up financial advisors on finra.org and on sec.gov
  3. Set up an initial appointment to get to know them
  4. Take an assessment after your meeting - Is this someone you are comfortable with?

FACT

Stats show that ~64% of the super rich ( those with $25 million or more in assets) who work with full service brokerages and financial advisors still take the time to do their own research.

So despite working with financial experts, it’s still a good idea to educate yourself about your investment because no one can care about your finances more than you!


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Complete the assessment in your workbook (located in the main menu) using the following pages: 

  • How To Buy Stock