The world of investing carries an almost magical aura. Everyone seems to think that the financial markets determine the state of the economy, and economic statistics are reported nightly. Every twist and turn of the Dow Jones Industrial Averages is assiduously tracked. This means that investors and traders will know about rises and falls in the value of any stock price.
The average investor was badly burned by the 2008 financial meltdown. In the wake of the crisis, major and minor brokerage firms have begun to wage bidding wars both for customers and for employees, who have started leaving Wall Street in droves after the collapse of Bear Stearns and other firms. This has led brokerages to cut fees in order to attract customers.
The entire question of brokerage fees can make firms collectively wince; after all, high fees have been a perennial consideration of investors for decades. The problem is made more complex by the fact that there are actually two types of brokerage firms: discount brokers and full service brokers.
Discount brokers are known for their low fees, but the downside is that they do not have the services to offer that full service brokers do. Full service brokers, on the other hand, charge higher fees but they also provide services such as retirement planning, tax advice, and personalized wealth management. The reason that full service brokerage fees are so high is that investors get what they pay for with these firms.
Many like the prestige that goes with opening an account with an old name like Morgan Stanley or JPMorgan Chase & Co. This may not be worth the high price they pay in terms of commissions and other fees, but if they are counting on advice about products like securities packaged from investment property mortgages, it is nice to know they will receive what they wish.