Discount Brokers Vs Full-Service Brokers

Last Updated: Jul -11-2019

Broker is someone who assists the investor in buying or selling stocks in the market. They are registered agents who are regulated by the Securities and Exchange Board of India (SEBI). Stockbrokers are of two types – Discount brokers and Full-Service brokers. In this blog we will try to know more about these brokers, the services that they offer, and their pros and cons, allowing you to choose the best one for your trading needs.

To have a good trading experience, you must find the best broker who can fulfill your trading requirements. However, before you start looking out for a broker; let us know more about the two major types of brokers.

• Discount Brokers

Discount brokers are famous for their unique selling point (USP), which is charging a fixed brokerage fee irrespective of the trade value. For instance, Zerodha, a broking company based in Bengaluru, charges a brokerage fee of only Rs 20 per order on equity intraday. Which means, if your trade value is Rs 10,000 or Rs 10,00,000, the brokerage fee will not alter. This is of a great benefit to the investors as it is cost-saving plan of trading.

Discount brokers provide limited services at a cheap rate. They have a very limited physical presence, which helps them work at low costs. This is favored by experienced traders who wish to spend money on trading rather than paying high brokerage fee.

Take a look at some of the leading Discount Brokerage firms and their brokerage charges, account opening charges, and annual maintenance charges.

	Zerodha	Upstox	Samco	5Paisa	Fyers
A/C Opening Charges	Rs.300	Rs.150	Nil	Rs.650	Nil
Demat AMC Charges	Rs.300	Rs.150	Rs.400	Rs.400	Rs.400
Equity Delivery	Nil	Nil	0.2% or Rs.20 per Executed Order	Rs.10 per Executed Order	Nil
Equity Intraday	0.01% or Rs.20 per Executed Order	0.01% or Rs.20 per Executed Order	0.02% or Rs.20 per Executed Order	Rs.10 per Executed Order	0.01% or Rs.20 per Executed Order
Equity & Currency Futures	0.01% or Rs.20 per Executed Order	0.01% or Rs.20 per Executed Order	0.02% or Rs.20 per Executed Order	Rs.10 per Executed Order	0.01% or Rs.20 per Executed Order
Equity & Currency Options	Rs.20 per Executed Order	Rs.20 per Executed Order	Rs.20 per Executed Order	Rs.10 per Executed Order	0.01% or Rs.20 per Executed Order
Commodities	0.01% or Rs.20 per Executed Order	0.01% or Rs.20 per Executed Order	0.02% or Rs.20 per Executed Order	Rs.10 per Executed Order	0.01% or Rs.20 per Executed Order

Advantages of Discount brokers:

They offer online services that one can access from any place at any time.
As mentioned earlier, they offer low brokerage charges as compared to full-service brokers
Offer a variety of brokerage plans – monthly brokerage plan, per trade plan, each segment plan. You can select a plan that best suits your trading needs
The brokerage plans are fixed irrespective of the types of trading (low volume or high volume)
Low transaction costs
Useful for intraday traders

Although discount brokers may seem to have numerous benefits, there are some disadvantages that you must consider before opting for a discount broker.

Disadvantages of Discount brokers:

They do not provide any research tips, recommendations or investment advice
They do not offer any additional investment services
They do not have any branch services
They do not have any relationship manager support. You may have to call on customer care number for any query
They do not provide any updates about stock market prices, news, IPOs, mutual funds, etc.
They do not offer call and trade facility. Investor cannot visit the branch or offer for trading

• Full-Service Broker

A full-service broker is a licensed broker who offers all types of trading and investment services to its customers, such as research advisory, wealth management, retirement planning and portfolio management services. They are also known as traditional brokers. They provide advisory and trading facility in stocks, commodities and currency.

Unlike the discount brokers, they offer both online and offline trading facilities. To enable this, famous full-service brokers have created a PAN India presence, having multiple offices and local sub-brokers for assistance in various cities across the country. In addition, they provide dedicated relationship manager to each of their clients who are always available to provide any assistance required.

Full-service brokers generally have to employ a lot of people as they have their own dedicated research team. This team conducts thorough technical as well as fundamental analysis of the market and publishes various reports on stocks and companies. They also keep the clients updated with the latest trends of the share market.

As they offer numerous services benefiting the investor, they charge more brokerage than the discount brokers. In addition, most of the brokers charge less brokerage for high trade volume.

For example, ICICI Direct charges 0.75% brokerage for trade turnover of less than Rs 10 lakhs per calendar quarter. This is known as their I-Saver Plan. In this plan, the brokerage percentage decreases with a rise in trade turnover with 0.25% brokerage charged for trade volume of above Rs. 5 Crore per calendar quarter.

Take a look at some of the leading Traditional Brokerage firms that let customers invest and trade in stocks, futures, options, currencies, and bonds in the Indian Stock Market.

	ICICI Securities	HDFC Securities	Share Khan	Axis Securities	Angel Broking
A/C Opening Charges	Rs.975	Rs.999	Rs.750	Rs.900	Rs.600
Demat AMC Charges	Rs.450	Rs.750	Rs.400	Rs.500	Rs.300
Equity Delivery	0.25% - 0.5%	0.3% - 0.5%	0.2% - 0.4%	0.25% - 0.5%	0.1% - 0.3%
Equity Intraday	0.025% - 0.05%	0.03% - 0.05%	0.02% - 0.04%	0.025% - 0.05%	0.01% - 0.03%
Equity & Currency Futures	0.03% - 0.05%	0.03% - 0.05%	0.02% - 0.04%	0.025% - 0.05%	0.01% - 0.03%
Equity & Currency Options	Rs.65-Rs.90 per lot	Rs.50 - Rs 100 lot	Rs.20-Rs.50 per lot	Rs.50 - Rs.100 per lot	Rs.20 - Rs.50 per lot
Commodities	NA	NA	0.02% - 0.04%	NA	0.01% - 0.03%

Advantages of Discount brokers:

They offer both online and offline trading services
They offer research advisory and other investment services
They have branch offices in multiple cities across India
They provide a dedicated Relationship Manager for assistance
They provide numerous services apart from trading
Best for delivery based trading
Client can opt for call and trade facility. Client can visit the branch or office for trading

Similar to discount brokers, full-service brokers also have some disadvantages which investors might have to face.

Disadvantages of Discount brokers:

They charge high brokerage fees
Brokerage plans vary for traders with high volume traders enjoying lower brokerage
Transaction costs are higher
Non-affordable for intraday traders

We have seen the positives and negatives of discount brokers and full-service brokers. It is important that you understand all of these details and figure out what works best for your trading requirements. Now the question that arises is when to choose a discount broker or a full-service broker for oneself.

One must realize that it makes no sense in paying high amount of brokerage fee to a broker if you are just willing to trade and not interested in any other investment services. Also, it is not a suitable advice to opt for low brokerage fee trading, just because you do not have enough time and knowledge about the market as it may lead to loss.

Hence, you must choose a discount broker if the answer to most or all of the questions given below is YES:

1. Do you choose stocks on your own?

2. Are you comfortable in trading online?

3. Are you are experienced trader who does not need any assistance and is well-versed with the stock market?

4. Do you want to save cost on brokerage fee?

And, if the answer to most or all of the questions given below is YES, then you must opt for a full-service broker.

1. Do you wish to get research-based advice on stocks and trades?

2. Are you a high volume trader – someone who generally trades in crores every year?

3. Do you need assistance in trading?

4. Do you prefer face-to-face customer support system?

In conclusion, let us summarize all the points:

	Discount Broker	Full-Service Broker
Brokerage	Charge a flat fee on each executed order irrespective of the trade value	Generally, charge a percentage of the trade value. Consider low brokerage fee for high volume trades
Brokerage charges	Rs 10 – Rs 20 per order	0.25% to 0.75%
Services	Very rarely, may have broking services with few brokers offering Mutual Funds services	Broking services, research, wealth management, retirement planning, depository services and more
Suitable for	Traders who prefer online trading	Frequent traders who need advice and assistance related to all kinds of trading and investment services
Physical Presence		Strong PAN India presence of most of the brokers
Customer Service	Online services, email, chat	Has RM assistance, branch servicing, email, chat, doorstep servicing, and more
Examples	Zerodha, Upstox, Trade Smart Online, SAS Online, Tradejini and more…	ICICI Direct, Kotak Securities, Sharekhan, HDFC Securities, Axis Direct, Edelweiss, and more…

Write Comment

↑