image of Full service brokers vs Discount brokers in India article

Full-service Brokers & Discount Brokers in India [All you wanted to know] – Updated

We make an investment in the stock market with the expectation of good returns out of it. So, it is very crucial that we have to select the right stock broker to start investing in the stock market. These brokers must be registered under Indian stock exchanges which are regulated by the Securities and Exchange Board of India (SEBI).

There are two types of stock brokers in India:

image of type of broker

Therefore, the question arrives for the beginners that how they will select stock brokers as their trading platform. So, you should first understand that what is a Broker? And then understand these two categories of brokers by comparing their services and features provided, trading charges and amount of opening balance etc.

In this article, we will discuss in the following topics –

Let start…

What is a broker/stockbroker?

A stockbroker/broker/investment adviser is registered professional personnel who executes buy and sell orders for stocks and securities on behalf of you (i.e. client). They charge a fee or commission from the percentage of the transaction as the brokerage for the services rendered. Stockbrokers are mostly associated with a brokerage firm or financial organization.

These brokers are licensed, agent. They are enough qualified and certified to offer securities investment advice to their investors. Brokers also counsel what and when to buy stocks, whether to hold or sell stocks etc.

image of stock brokers
Brokers and their activities

Stockbrokers in India

A number of broking firms exist in India. Many of them have the International presence also. Here are some of the leading Stock Broking firms in India.

  • IndiaInfoline
  • ICICIdirect
  • Zerodha
  • Share khan
  • India bulls
  • Geojit Securities
  • HDFC Securities
  • Religare
  • Angel Broking etc.

How do I know whether a broker is registered or not?

Stockbrokers are governed by the Securities and Exchange Board of India (SEBI) Act, 1992, Securities Contracts (Regulation) Act, 1956. So, every stock broker is required to be a member of the stock exchange. SEBI issued them a registration number, registration certificate and other relevant detail.

Every stockbroker usually mentioned registration number on their website. Therefore, you can easily confirm the registration details on SEBI website. The SEBI website provides the details of all registered brokers.

Example, I have found Zerodha’s registration no on their terms and conditions page. SEBI registration no is also mentioned in the footer section.

image of zerodha registration no
Zerodha Registration Number

Now you can put the registration no in this link and check their registration details.

image of SEBI registration no VERIFICATION
Registration Number Verification in SEBI website

Most of all, before start trading with a broker, you are recommended to verify all the details. Brokers will also provide you Risk Disclosure Document, which would give you a fair idea about the risks associated with the stock market. So, you need to go through all these documents carefully.

What is a Full-service broker (Traditional broker)?

Full-service brokers provide trading, research, the advisory facility for stocks, commodities, and currency. Along with buying and selling of a stock or bond these brokers offer a wide service of investment planning, financial research, retirement planning, tax advice and regular portfolio updates.

image of full-service broker
Services provided by Full-Service Broker

Full-service brokers in India

There are over 10,000 traditional retail full-service brokers are operational across India. Full-service brokers apart from shares also provide a variety of services such as IPO, FPO, debt instruments, mutual fund schemes, insurance, loans product etc.

Full-service brokers offer the 3-in-1 account

Therefore, the commission charged by the full-service broker is higher than the other brokers. Sharekhan, Angel Broking, Edelweiss, Aditya Birla Money, Motilal Oswal etc are very renowned examples of full-time brokerage houses. Again, HDFC Securities, ICICIDirect, Kotak Security etc. are full-service brokers offer a 3-in-1 account, that is, a savings bank account, a trading account and a Demat account to their client.

The full-service brokers generally provide expertise services for those who lack time to stay updated on required share related information. Some full-time brokers also offer customized support, portfolio management services, financial planning services, and services relating to wealth management.

image of 3-in-1 account

A full-service broker – for whom?

Now, an important question arises that which category of investors/traders requires services of full-service brokers. So, we are discussing this in the following section.

  1. High volume trader who looking for higher margins and margin funding.
  2. An investor who needs guidance at every step of investment.
  3. Traders who want to trade by physically visiting any branch
  4. Investors and traders who are interested in call & trade
  5. Who interested to invest in other financial products (e.g. mutual funds, IPO, debt instrument etc.) through the broker.

Advantages of Full-Service Broker

The following are the important benefits of using services of full-service brokers.

  1. Counsel and recommendations based research –

    Every full-service brokerage firm uses financial professionals to research and analyze the stock market. Most of all, their goal is to keep you as a client and helping you to meet your financial goals.

  2. Proper and timely advice and guidance –

    There’s a ton of financial data available on the web, but that doesn’t mean that you want to spend your free time to track it down. Full-service brokers provide a proper timely advice and guidance to their clients through account representatives known as relationship managers. So, based on the client’s preferences the representatives make recommendations on stocks, funds etc.

  3. An ongoing relationship –

    Nothing beats a one-to-one dialogue when it comes to choosing among the many investment opportunities that are available. Every Full-service brokerage firm provides research and analyzes of each individual stock to their clients.

  4. Customized research access –

    Full-service brokers provide access to investment research products. Hence, these research products give in-depth information on various investment instruments.

  5. Advanced portfolio monitoring –

    A full-service broker provides proper and timely portfolio monitoring to their clients. That helps the investors least time-consuming for picking the right stocks in the first place. Therefore, it is very important for investors who lean toward fast-moving stocks or sectors, especially who invest in options or futures. Along with this, a full-service broker can set and monitor stop-loss limits on fast-moving shares more accurately and conscientiously than working individuals can do by themselves.

  6. Help to optimize investment objectives –

    The relationship managers of such brokers remain in personal touch with the clients. And they understand properly the investment goals of their clients. So, this helps them by providing advice and replies about specific investments. Hence, help in accomplish wealth-building goals.

image of advantage and disadvantage of full-service broker
Pros and Cons of Full-service brokers

Disadvantages of Full-service Broker

The following are the important drawback of full-service brokers –

  1. Relationship managers are salespeople –

    The relationship managers are basically generating brokerages and fees from customers. And their fees or compensation is based on their ability to produce revenue for the firm. So, being a client, you need to be cautious every time they deal with them.

  2. High brokerage –

    Full-service brokers charge brokerage quite high from the clients. So, this brokerage is negotiable only when you show trading volume to them.

  3. Non-affordable brokerage for intraday trading.

  4. Hold the decision-making authority –

    When a customer hand over the decision-making authority on their behalf, every chance is there to turn to possible negative. So, the better idea is, to keep the decision making authority with you. If you don’t understand something then first make yourself aware and then go for action.

How to choose a full-service broker?

The best approach is to make a list of facilities and then to match it with the offerings from the full-service brokers. Some worth points are listed below.

  1. Pricing –

    Compare brokerage and other fees that are being charged by the broker. So, remember to check that the broker must compensate the charges with additional facilities and service provided.

  2. Research facility provided –

    This is an add-on service that will help you to meet your financial goals. These brokerage firms do extensive research on companies or sectors of interest. Their clients can access these data and receive trading tips from time to time.

  3. Local office –

    Local branch or a sub-broking office of the broker under consideration is always preferred in case of selecting a full-service broker. So, you can visit the office if needed.

  4. Facilities –

    Evaluate the offered facilities. Choose the one who’s offered facilities matches with your requirements. If you are a trader chose with features with day trading facilities at a competitive cost. On the other hand, if you are an investor choose the one with the low brokerage.

  5. Minimum trades –

    Always check for clause or subclause about minimum trades. If your brokerage firm provides a 3-in-1 account, then there must be some rules for minimum balance on the saving account.

  6. Investment options –

    Besides stocks, if you are interested in mutual funds, IP, FPO, commodity trading, insurance products etc. then you must check offered products by your broker. Also, check and compare costs associated with all these.

  7. Customer service –

    One of the most important point of consideration. It is always recommended to select a broking house that provides you with necessary service when you need them. It could be over phone or email or in any other way.
    So, do not forget to review customer services on social media and discussion forums before your final decision on selection. Hence, these opinions are a vital point that will give you a deep insight into the quality of services provided by brokers.

image of bais os selecting full-service broker
The basis of selecting Full-service Broker

Top 10 Full-service brokers in India

Below is the list of top 10 full-service brokers in India.

  Broker Name Website
1. ICICI SECURITIES LTD
2. HDFC SECURITIES LTD
3. SHAREKHAN LTD
4. AXIS SECURITIES LTD
5. KOTAK SECURITIES LTD
6. ANGEL BROKING PVT LTD
7. MOTILAL OSWAL SECURITIES LTD
8. KARVY STOCK BROKING LTD
9. INDIA INFOLINE LTD
10. SBICAP SECURITIES LTD

What is a Discount broker (Budget broker)?

Discount brokers provide necessary trading facilities but no advisory in the least possible cost in stocks, commodities, currency, and derivatives. As a result, they become the budget brokers in India. Discount brokers are a recent trend and growing very fast.

image of services provided by discount broker
Services provided by Discount Broker

Discount broker in India

The discount brokerage firms first opened their shops in India in the year 2010. Because of their cheap brokerage, thousands of investors and traders moved from the full-service brokers to the discount brokers. Discount brokers usually offer 60% – 80% cheaper brokerage and free trading terminals for everyone. Therefore, they are well accepted and become very popular rapidly.

Zerodha and RKSV are pioneers of Indian discount brokerage industry. Both of them offer flat Rs 20 per trade brokerage. This allows traders to execute trades of any size and pay flat Rs 20 brokerage on the buy/sell order.

After the huge success of the discount broker business model, few traditional brokers adopted their strategy to offer flat brokerage plan and become a discount broker. IIFL and Master Capital are among the few big traditional brokers who now offer discount brokerage plans.

Why choose the Discount Broker?

When you are trying to find the best stock broker, it is much simpler to opt for a discount broker. Actually, when we start comparing the top brokers, investment fees are usually what matters most. Accepting a higher fee could end up being a smarter move in the long run based on other factors. So, the less money you spend on executing trades, the more you’re interested in investing.

Discount Broker – for whom?

Therefore, investors who trade frequently especially benefit from the lower commissions usually select discount brokers as their trading platform. Again the investors, who don’t need advice, able to do research on their own, have small portfolios, or just want their trades executed are also usually better off using discount brokers.

Advantages of Discount Broker

These benefits an investor or trader receives while working on discount brokerage –

  1. Low brokerage plan – 

    Discount brokers provide flat free brokerage. So, this factor contributes to greater profits and improved decisions towards investment. This affects most of the beginners in the stock market.

  2. Useful for intraday traders- 

    In intraday trading, a frequent trade pays a large chunk of their profit as commissions. But due to low brokerage in discount broker service both the investor and trader save large amounts of money. Hence, this results in increased profits and more financial involvement.

  3. Straightforward services-

    Discount brokers provide only the trading platform to the investors/traders to make their own trades. They don’t offer any research, advice, and guidance on any trade. So, the investors/traders depend on their own research.

  4. It is convenient-

    Discount brokerage service comes to online trading. Therefore, you only need to open a trading account via the internet and you’re ready to place your buy/sell orders. You only need to have an internet connection. Hence, online trading is convenient and accessible from anywhere.

  5. The investor has greater control- 

    Here, investors are able to review all of their trading and investment options instead of depending on a broker. Therefore, they’re able to monitor their portfolio, make decisions and buy/sell stock on their own. Hence, all these provide investors a greater control over their investment.

image of advantage and disadvantage of discount broker
Pros and Cons of Discount brokers

Disadvantages of Discount Broker

The following are the important drawback of full-service brokers –

  1. No branch office –

    Maybe there is no office or branches in your city. So, Client cannot visit the branch or office for Trading.

  2. Minimal customer service –

    Usually, clients have to contact on customer care number for all query.

  3. No guidance –

    No information about stock markets prices, News, IPOS, the Mutual fund provided by the firm. Discount stockbrokers do not offer any type of direct person-to-person advice, research, and more comprehensive analysis.

How to choose a discount broker in India

Choosing a discount broker very much depends on need and type of trade you are planning. The following points must be considered before such selection:

  1. Brokerage –

    Discount brokers mostly offer flat free brokerage or price-per-trade. So choose a discount broker that offers minimum brokerage.

  2. Other fees and charges –

    All brokers charge other fees like fees for closing an account, transferring assets into the account, annual fees, account inactivity fees and charges for not maintaining a minimum required balance, etc. So try to select a discount broker who offers a minimum of such charges.

  3. Customer service –

    Discount brokers mostly provide online service. Each and every issue is resolved through phone or emails. So, customer service is one important aspect of selection. Therefore, please check for the kind of services these brokers provide before finalizing.

  4. Fund Transfer –

    Easy linking facility with saving account is another important aspect of selection of discount broker. Therefore, online money transfer and withdrawal should be fast and easy.

  5. Product selection option –

    Along with the stocks, investors usually look for other investment instruments also. So, consider the selection option offered by the discount brokers like government bonds, options, corporate bonds, and etc.

image of basis of selecting discount broker
The basis of selecting Discount Broker

Top 10 Discount brokers in India

Below is the list of top 10 discount brokers in India.

  Broker Name Website
1. ZERODHA
2. Upstox
3. MASTER CAPITAL SERVICES LTD
4. 5PAISA CAPITAL LTD
5. SAMCO SECURITIES LTD
6. SWASTIKA INVESTMART LTD
7. VNS FINANCE & CAPITAL SERVICES LTD
8. SOUTH ASIAN STOCKS LTD
9. R K GLOBAL SHARES & SECURITIES LTD
10. ASHLAR SECURITIES PVT LTD

Full-service brokers vs Discount brokers

So, we have enlisted the key differences between full-service brokers and discount brokers based on different criteria.

Factors FULL-SERVICE BROKER DISCOUNT BROKER
Service Advisory for shares, mutual funds, bonds, currencies, commodities etc Provides a trading platform
Brokerage Charge commission in percentage terms of each trade executed. Offer a flat fee on each trade executed.
Brokerage rates Typically between 0.3 – 0.5% Charge as low as Rs 10/trade, irrespective of the order value
Suitable for Those who want advisory for their investment. Those who are well versed with the market and can carry out own research
Research Department They have their own research departments for advisory. No such department.
Network They have a large number of branches in different cities. Usually, do not have many branches and provide online services
Customer service Face to face customer service available. Most of all provide online services for customers.
3-in-1 Account (Saving+demat+trading) Available Not available

Now, we are almost at the end of our discussion and we have discussed all the relevant question as mentioned in the beginning.

Which brokerage firm is the best for beginners?

Selection for a suitable broker or firm is the very first step towards stock market.

First of all, you have to think about what you have and what you want? If you need advice regarding your investment, then you should go for a full-service broker. But, if you are able to do research on your own or you already have a financial adviser, then you can probably select a discount broker. In conclusion, this selection really depends on your personal needs, preferences and available time.

Please leave your queries in the comment section and let us know your views regarding this article. If you need any other information regarding Full-service broker and Discount broker, please let me know. I will try my best to solve your quires.

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