6. What are discount brokers?

How Do Discount Brokers Work?

Discount brokers execute trades on behalf of their clients and do so at a reduced cost. In many cases, these trades are set up to be executed automatically with the help of computers and algorithms. As a result, you’re often able to set up your own trades, usually online or by using a mobile app.

Following the lead of Robinhood and other fintech companies, many discount brokers recently dropped their trading commissions to $0 for stocks and exchange-traded funds (ETFs). In the past, many discount brokers offered trades for between $2.99 and $7.99. You would pay this cost each time you put in an order.

For the most part, discount brokers don’t offer advice or guidance to those who use their services even though some have educational content on their website or app. While some of these brokers may offer add-on services like financial planning or portfolio review for a cost, you’re usually on your own when it comes to making investment decisions and deciding which assets to add to your portfolio.

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