Expert: Paul Henneman - 7/8/2004

Question
Hello:

What is the difference between a direct access brokerage and an online discount brokerage?

I thank you for your reply.

Answer
Thank you for your question!
By 'direct access brokerage' I think you are referring to what is commonly called 'Full Service Brokerage'.  The main difference is that a full service brokrage provides many services including advice on how to build a portfolio, what stocks to buy/sell, mutual fund advice, tax shelters, and many other financial advisory services.  A full service brokerage will have higher commissions and fees due to these additional services. A discount brokerage often only provides buy and sell services, you must tell them what exactly you want to buy and sell. This is perfect for an investor that plans to manage their own portfolio, as the fees can be much lower.  Some of the better online discount brokerage services that I am aware of are: www.FOLIOfn.com, www.ETrade.com, www.Ameritrade.com, www.TDWaterhouse.com
Many of the discount online brokerages are beginning to offer research and information on stocks to help you make investing decisions on their websites. You have to research this on your own, but sites such as www.FOLIOfn.com and www.TDWaterhouse.com are beginning to provide such resources.  

Some of the full service brokrage houses are Morgan Stanley, Merrill Lynch, Lehman Brothers, Credit Suisse First Boston, Citigroup, and others.  These institutions have financial advisors that should talk with you to find out your specific needs, and then provide advise on exactly what to do. There are likely account minimums in that you have to invest a certain amount, in contrast to online brokerages that rarely have minimums.

I hope this helps! Please do not hestitate to follow up with me if I can be of any further serivce.

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com