Brokerage House (Brokerage Firm)

Definition

The term brokerage house refers to a firm that charges a commission for facilitating a variety of financial and investment services. Through their stockbrokers, brokerage houses allow investors to buy and sell publicly traded securities such as stocks and bonds.

Explanation

Also referred to as a brokerage firm, a brokerage house provides services to its clientele who wish to trade stocks, bonds, and other securities. In exchange for providing these services, the firm charges a relatively small commission. The brokerage house may also employ a staff of analysts which provide recommendations to investors. In addition to transaction services, such as facilitating the buying and selling of securities, brokerage houses can also offer loans to approved investors to purchase securities on margin.

Depending on the investor's relative knowledge of the various markets, they can select from a number of brokerage houses, including:

  • Full Service Brokerage: the fees charged by these firms will be relatively high because they offer their clientele a wider variety of services such as estate planning, income tax advice, and security analyses.
  • Discount Brokerage: the fees charged by these firms will be relatively low because their primary service offering is the buying and selling of securities. To keep costs low, many of these firms interact with their clients via the company's website. Investment advice will be limited.
  • Online Brokerage: these firms compete for investors by charging low transaction fees. Clients will place buy and sell orders via the firm's website. In order to keep cost low, these firms do not employ analytical staff or offer investment advice.

Related Terms

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