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The Brokerage Industry

 Marlon Jerez / Consultant in Economics and Financial Issues
Translated by Economic Adviser Soraya Nasrallah

In actuality the brokerage industry continues to develop rapidly. Many of the traditional restrictions against banking activities within the brokerage industry are being eliminated and the barriers are disappearing. Due to this, some commercial banks have as subsidiaries, brokerage houses that offer discounts and some of them have available accounts that offer all of the services that are offered by a checking account.

The basic function of a brokerage firm is to execute buy and sell orders for clients. Traditionally these firms have offered the investigation of the quality and the possibilities of investing in a variety of investment products. It is still accustomed for brokerage firms to offer information about possible investments free of charge. This activity of bringing free of charge stock investment reports is one of the main tools that are utilized by brokerage houses to compete against other firms and to investors it continues to be an important service.

Despite the previously, not all investors consider that investment reports is an important service. Some investors prefer other types of services since many investors donít believe that these investment reports are useful. In order to capture this vast diverse clientele, the brokerage industry has segmented itself. After the restrictions in commissions were eliminated, several brokerages began to open up their doors as discount brokerage firms. In actuality, brokerage firms may be classified into full service brokers and discount brokers.

Full service brokerage firms continue to offer informative stock reports and a level of service much higher than other brokerage houses. Discount brokerage houses only dedicate themselves to execute orders for clients. Full service brokers are sellers looking for purchasing and selling for clients and offering more customer service than is available from discount brokers. It is many times possible that a client will not even know who is taking care of the buy or sell order that they placed.

These differences in services and philosophies may lead to great differences in commission costs. It is evident that these differences may be an important factor in the return of an investment. This is particularly true when we see that these commissions are added to the purchase as well as to the sale of a stock or other investments.

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