Brokerage Firms

Brokerage firms are financial intermediaries that provide brokerage or trading accounts.
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Brokerage firms execute trades for customers, serve as custodian of customer’s assets, provide financial research and advice, present live stock quotes, and provide a number of additional portfolio and investment services. Brokerage firms typically have a minimum deposit requirement and subsequently charge commissions, fees, and interest for services.

Brokerage firms may specialize in specific asset classes or investment functions. Full-service brokerage firms may provide financial advice and recommendations, maintain physical offices, provide managed accounts, and offer other wealth management services. Discount brokerage firms typically provide fewer services than full-service brokerage firms and are known for lower fees.

The distinction between full-service and discount brokerage firms has become less clear as service levels become more homogenous and industry competition for customer acquisition has increased.

Brokerage firms provide a commodity-like service in trade execution and generate additional revenue through value-added services or platform subscription fees. Brokerage firms typically provide significant investor education resources to educate customers.

Investors must utilize brokerage firms to place trades unless they are active members of an exchange or participate in a direct stock purchase plan. Trades can be executed electronically or called in directly to the broker.

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FAQs

What does a brokerage firm do?

Brokerage firms are financial intermediaries that provide brokerage or trading accounts. Brokerage firms execute trades for customers, serve as custodian of customer’s assets, provide financial research and advice, present live stock quotes, and provide a number of additional portfolio and investment services.

Full-service brokerage firms may provide financial advice and recommendations, maintain physical offices, provide managed accounts, and offer other wealth management services. Discount brokerage firms typically provide fewer services than full-service brokerage firms and are known for lower fees.

Brokerage firms provide a commodity-like service in trade execution and generate additional revenue through value-added services or platform subscription fees. Brokerage firms typically provide significant investor education resources to educate customers.

Investors must utilize brokerage firms to place trades unless they are an active member of an exchange. Trades can be executed electronically or called in directly to the broker.

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