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Discount brokers are stockbrokers who don’t give investment advice. Discount brokers are not always human beings the term “discount brokers” can be used to describe either an individual (“Frank and Sarah are discount brokers”) or a company (“OptionsXpress and FirstTrade are discount brokers”).

Discount Brokers and Full-Service Brokers – A Comparison

In the days before discount brokers, only rich people could afford to invest. This is because the non-discount brokers charged such high fees and commissions. Starting with Charles Schwab, discount brokers became more popular among average investors, and the fees and commissions charged by discount brokers have been going down each year for the past several decades.

However, it is interesting to note that discount brokers still lag full-service brokers in overall assets under management. While discount brokers serve many more clients, affluent investors snub discount brokers in favor of their full-service counterparts.

As a result, despite the fact that discount brokers are more popular on an individual basis, full-service brokers are more popular in a total dollar basis.

Charles Schwab, the leader among discount brokers, had a total of $510 billion in assets under management as of 1999. By comparison, the full-service broker Merrill Lynch had a staggering $1.7 trillion with a “t.” The great disparity is due to the fact that large institutional shareholders and ultra-rich individual investors often need services that go beyond simply placing buy and sell orders.