What is a Brokerage Fee? Definition and Overview
A brokerage fee is a fee charged by an independent agent or financial institution in exchange for facilitating transactions between two or more parties.
Image Source: Brokerage Fee
Brokerage fees can cover a variety of transactions and transaction-related services, including:
• Sale and purchase of financial products
• Advice on transactions
Brokerage Fees – Additional Overview
Brokerage fees are often a combination of flat rates and percentages.
For example, a stock broker will execute the purchase of 2,000 shares of ABC company stock at $3 per share.
The broker charges a flat rate of $30 for the first 1,000 shares, and a rate of 2 cents per share after that. In other cases, the broker may simply charge a percentage on the total sale, such as 1.5% of a $100,000 dollar transaction.
Image Source: AdvisoryHQ
Brokerage fees are collected from both buyers and sellers. Lower brokerage fees are often found through discount brokers, who provide a minimal service of executing transactions.
Higher brokerage fees are charged by full-service brokers, who offer a variety of brokerage services include reports and professional advice.
Investors who typically buy and hold stock, without making a lot of transactions, are typically drawn toward discount brokers.
On the other hand, investors who frequently buy and sell stock may benefit from more expensive and comprehensive services offered by a full-service broker.
AdvisoryHQ (AHQ) Disclaimer:
Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.
Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.