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 Essentially, there are two types of brokers for trading the
financial markets: the full-service brokers, like Goldman Sachs and Morgan Stanley, and the online discount brokers, like Ameritrade and Interactive Brokers.
With the wide acceptance of the internet, traditional full-service brokers had
to compete head-on with online discount brokers as these online stock brokers and futures brokers used aggressive low commissions to lure investors and traders away from the more traditional full-service brokers.
The common questions new investors and traders ask are how can
these discount brokers offer such low commissions and still stay financially
viable? Is it going to be a case of "You get what you pay for" or is there more
to this than meets the eye?
What Type of Investor/Trader are You?
 It must be understood that the full-service
brokers and online discount
brokers each serve their own niche markets where they offer different levels
of services for different types of investors and traders. Ideally, the best way
to choose the type of stock broker or futures broker you need would be to know what kind of investor or
trader you are and also the frequency and size of trades that you intend to put
on. All this sounds good, but alas, someone new to the markets may not be
in a position to determine this.
If you are new to the financial markets, it is highly recommended that you
choose a full-service broker initially. An experienced and trustworthy broker
would be able to impart valuable knowledge such that you are able to navigate
the markets on your own. There are of course many horror stories about "account
churning" and fraud that will scare off any new investor but in reality, these
are the exception rather than the norm. It pays to trust your instincts rather
than the "sales pitch" when dealing with brokers and you should run at the first
sign of your instincts sounding off alarm bells.
Common Mistakes made by Investors
 The common mistake made by new investors is that their expectations
of their stock broker and futures broker may not be realistic. They do not view the broker as a person
who offers them a service in order to trade & invest in today's complex
financial markets but rather their view is that their broker is there to give
them the latest hot tips and insider news so as to make them their millions from
the market. Sadly, these are the kinds of expectations that some brokers
actually try to fill at the detriment of their business. You have to remember
that although brokers have more experience and can usually tell whether a stock
is a good buy or a dog, better than the average investor, you have to understand
that many other external factors affect the market and the broker may not be the
best informed on what is happening.
Taking Control of Your Financial Portfolio
 Once an investor has "learned the ropes", the investor can decide,
if he so chooses, to take "more control" of his portfolio by getting an
online discount broker. The other reasons to make the switch to a discount
broker could be that the investor is now trading a larger size and therefore
needs to find someone who can offer him lower commission rates on high volume
trades, or simply that the investor's frequency of trades has increased and
calling the broker on the phone each time would be too slow and time sensitive
to be viable. It must be noted that once a solid relationship has been
established with a good full-service broker, more often than not, it is possible
for the client to negotiate very competitive commission rates to such a point
that it makes switching to a discount broker generally not worthwhile and hardly
cost & time effective.
In conclusion, investors are in the markets to make money. It is the
individual investor's responsibility and nobody elses to find a right
broker that will aid the investor in being profitable.
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