Is the do-it-yourself approach right for
you?
Consider the differences between full service and discount brokers
WINNIPEG -- Canadian investors are turning to discount brokers in growing numbers as more and more people take direct control of their investment decisions.
At a time of year when Canadians traditionally think about financial planning, Canada's securities regulators warn that discount brokers are not for everyone.
A discount broker provides access to markets so investors can buy and sell securities on their own. They do not provide investment advice. By comparison, a full service broker will examine your overall financial situation, gather information, make a plan based on your objectives, and provide advice as well as buy and sell securities for you.
Aside from the differing levels of service provided, other key differences include the costs of making trades and how quickly a trade can be made once you request it.
"Deciding between using a full-service broker or going it alone with a discount broker is a personal decision that investors need to think about carefully," said Doug Hyndman, chair of the Canadian Securities Administrators, an umbrella organization of Canada's 13 provincial and territorial securities regulators.
Although many consumers continue to want advice from a full service broker, the increase in the amount of available information has led many consumers to conclude that they can make investment decisions on their own without a traditional full service broker.
This has lead to more competition between brokers and an increase in the variety and type of services offered to the consumer.
"Investors need to ask themselves some questions and consider which approach is right for them," Hyndman added.
Are you ready for a discount broker? Ask yourself these questions:
- How much do I know about the markets and when to buy or sell a security?
- Do I have access to information about the markets and companies that I may invest in? Am I in a position to interpret and understand this information?
- Do I want to invest in specific stocks or would I prefer investing in professional managed products such as mutual funds?
- How actively do I want to manage my investments? Am I prepared to let my investments stay in one place or do I intend to actively buy and sell securities in an attempt to achieve return on investment?
- What level of risk am I prepared to accept to achieve my investment objectives?
- Why am I investing? Do I need investments to fund my retirement? Are my investments extra money that I can afford to lose without hurting my standard of living?
- How much time am I willing to put into overseeing my investments?
- What is the difference in cost between full and discount broker services?
- How can I trade -- personal contact, telephone or home computer?
- How quickly will the trade be executed once I order it?
- What level of customer service will be provided if there are problems on my account?
For more information, please contact:
Nancy Stow |
Dean Pelkey B.C. Securities Commission (604) 899-6880 |
Denis Dubé |
Bonnie Beswick Alberta Securities Commission (403) 297-2664 |
| Ainsley Cunningham Manitoba Securities Commission (204)-945-4733 |
Suzanne Ball New Brunswick Securities Administration Branch (506) 658-3117 |