Investing: Discount or full-service broker?

Bottom line, the services your brokerage offers now may be quite different from those offered when you signed on. "Now's a great time to reassess your relationship with your broker," says Catherine S. McBreen, managing director at Spectrem Group, a financial consulting firm. "You can say, 'I can get all this from someone else at a lower cost, so why should I be using you?' "

Financial planner Todd D. Bramson agrees. "There's such a craving among investors today for knowledge and help," says Bramson, a senior associate at North Star Resource Group in Madison, WI. "Brokerage firms are going to have to offer more options, more research, and make it more accessible and affordable."

Do I need a full-service firm? full-service broker can provide you with a broad range of wealth management options and the comfort and convenience of having a single adviser at the helm. Fees for this kind of one-to-one attention are usually based on a percentage of the assets in all your accounts, and are often on a sliding scale that declines as your assets grow. This kind of fee arrangement makes more sense than one based on payment-per-trade if you work with a broker and you want that broker focused on growing your returns, not running up commissions.

If you're already with a full-service broker and are giving it enough business-that is, you trade dozens of times a year-you can try negotiating their fees. "It's always been a good idea to hold their feet to the fire every couple of years," says Maria Crawford Scott, journal editor at the American Association of Individual Investors (AAII), a not-for-profit investor education group.

Scott notes that with a full-service brokerage, you're getting some distinct advantages over discounters. "Full-service brokers can work the trade better, giving you advice on exactly when and how to place a trade, to allow you to get the best price," she says. Moreover, full-service brokers also do a better job of serving bond investors, even those who don't have a lot to invest. "This is one area discount brokers have yet to really move into," Scott adds.

If your portfolio's not that big, some full-service firms offer a middle option. These self-directed, "nondiscretionary" accounts give you access to a staff of advisers, but you make all the investment moves. Your brokerage executes the trades or buys the funds, but responsibility for the decision is yours, not the advisers'. For example, Smith Barney's AssetOne program requires a minimum of only $50,000. An annual fee, assessed quarterly based on the market value of all your eligible assets, gets you retirement and estate planning advice and access to online investing. You pay no commissions and IRA fees are waived. Schwab's version is called Schwab Private Client, which is geared to more affluent investors.

When is a discounter a better choice? If you're focused on straightforward goals, a discount firm can give you resources and guidance and save you a substantial amount on commissions and fees.