A brokerage house, also called a brokerage firm, is a company licensed to buy and sell stocks or securities. Acting as an intermediary between buyers and sellers, this company typically employs brokers who carry out the wishes of the firm's clients as they pertain to the trading of stocks. Broker services are usually provided on a commission basis.
Commission amounts charged for the buying and selling of securities vary with each brokerage house. Often, the price per trade is indicative of the level of service the firm offers. For example, a brokerage firm that charges fees on the lower end of the scale may not execute trades as quickly as one that charges higher fees. Likewise, a firm that charges higher commissions usually offers more personalized service.
In addition to commissions, a brokerage firm may charge various other fees. These fees may include charges for transferring assets, closing an account, and wiring money. Additionally, a brokerage firm may require the payment of IRA custodian fees, as well as annual services charges and fees related to periods of account inactivity. Depending on the policies of the brokerage house, a client's account may also incur a fee for failing to meet a minimum required account balance.
A brokerage house may offer a variety of investment products or specialize in just one or two. Typical choices include stocks, mutual funds, and options, as well as government and corporate bonds. Over-the-counter (OTC) bulletin board stocks may be offered as well.
There are several different ways of executing trades. A brokerage firm may choose to employ all or just some of them. For example, a firm may allow for trading over the phone or via the Internet, as well as other methods.
In addition to the trading of various investment products, a brokerage firm may offer certain banking services. These services may range from money market sweeps and check writing to visa and ATM cards. Cash kept in a brokerage house money-market account may carry a higher interest rate than money held in a regular bank account.
Often, a brokerage house may offer market research and investing strategies as well. Though much of the information uncovered by such research may be available on the Internet, many individuals don't have the time or the inclination to look for it. In such cases, having an account with a firm that conducts in-depth investment research may be extremely beneficial.