What an execution-only broker does
An execution-only broker takes the instructions you give it and carries them out. You choose the investment, the amount and the timing, and the broker places the order on the market for you. It does not look at your wider finances or suggest what would suit you. You pay for the orders it carries out and for holding the account, not for advice. The arrangement is often called self-directed, which means you drive every choice. This model suits people who already know what they want to buy. After the trade is placed, the broker holds the investment for you and reports on it, but offers no view on whether it was a good choice.
What a full-service broker offers
A full-service broker places your trades too, but it also gives you personal guidance. Your named professional may review your goals, your time frame and how much risk you are comfortable with. They may then propose holdings or a plan to follow. The service is usually built around a relationship and regular reviews rather than a single transaction. Some firms also offer a managed portfolio, where holdings are adjusted for you over time. Because the firm does more of the thinking, you pay for the guidance as well as for the trades, and the relationship is typically more involved than a simple order.
Who makes the investment decision
The deciding difference is who makes the investment decision. With execution only, that decision stays with you from start to finish. Under full service, part of the decision is shared with the firm, and the way it is paid usually reflects that extra work as well as the trade itself. Other things, such as order routing and the protection of your assets, can look similar on the surface. So the question to ask is simple: do you want to make the decision yourself, or do you want help making it?
When execution only is the better fit
Execution only tends to suit people who have already done their own research and know what they want to hold. It also suits anyone who prefers full control and a direct route to the market. You will need to accept that nobody reviews your choices for you. Take time to read how a firm's order types work. Check how investor protection works where you live, since the rules vary by country and by provider. Look at stock brokers to compare the options in your area.
When a full-service broker is the better fit
A full-service broker can help when your situation is complicated or when you feel unsure where to begin. Anyone with several goals, a pension to coordinate or a large sum to place may welcome an outside view. It can also suit anyone who wants a relationship and regular reviews rather than doing everything alone. Ask what the service includes in writing before you commit, because the scope varies between firms. Check that the person giving guidance is qualified to do so, and how they are paid for their time. Some people start with execution only and move to guidance later, or the other way round.
Which to pick
Match the model to the kind of investor you are. Neither model is better in every case. The right choice depends on how much you want to decide yourself and how much help you would welcome.
- Execution only is usually the simpler route when you know the investments you want and enjoy making the decisions yourself.
- Newcomers who want help talking through their goals may find a full-service broker more suitable.
- A complicated situation, with several goals or a large sum to place, may call for a full-service firm.
- Keeping contact to a minimum suits execution only, as long as you feel confident in your own choices.
Whichever model you pick, check the provider's own terms and confirm the rules with your local financial authority. Read about how to judge broker safety before you open any account. For a wider comparison of what each firm offers, see how to choose an investment platform. Revisit the choice if your circumstances change.