Definition of retail brokerage account
Retail brokers use information technology to organize buyers and sellers together within financial markets. Stock markets operate as large auctions, and individual stock trades are executed at points where the lowest offering and highest bidding prices intersect.
Retail brokerages may be classified as either traditional or discount brokerages. Traditional brokerages are associated with financial advisers that offer recommendations on stock market investments, insurance products and employee benefits. Advisers may charge annual fees to write comprehensive financial plans for retail clients. Discount brokerages, however, simply take orders and clear trades without providing advice. Discount brokerages are notable for their online investment capabilities and low commissions.
This may be a good option for cost-conscious consumers who prefer to research their own investments. Retail brokerage firms provide liquidity for smaller investors, allowing them to participate within the stock market. Liquidity is defined as your ability to convert any asset into cash. Alternatively, retail brokerages provide Main Street investors with access to stock market technology for relatively small trading commission costs.
Retail brokerages often provide extensive financial education to help prospects and clientele effectively navigate the stock market. Investment seminars, newsletters and consultations alert savers to the benefits of money management, and encourage them to invest wisely.
They help lower costs in two ways:. Since investor money is pooled before stocks are bought or sold, it enables investors to contribute small amounts of cash with which fractional shares of specific stocks can be purchased. This is usually not possible with a regular stockbroker. Many broker-dealers also serve primarily as distributors for mutual fund shares. These broker-dealers may be compensated in numerous ways and, like all broker-dealers in the United States, are subject to compliance with requirements of the US Securities and Exchange Commission and one or more self-regulatory organizations , such as the Financial Industry Regulatory Authority FINRA.
The forms of compensation may be sales loads from investors, or Rule 12b-1 fees or servicing fees paid by the mutual funds. From Wikipedia, the free encyclopedia. Comparison of online brokerages in the United States.
Retrieved 10 October British Columbia Securities Commission. Thomas Smith 6 March Regulation of Investment Companies.
Lexis Nexis Matthew Bender.