What is a Brokerage House?

Nicole Madison
Nicole Madison

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.

Broker services are usually provided on a commission basis.
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.

Nicole Madison
Nicole Madison

Nicole’s thirst for knowledge inspired her to become a wiseGEEK writer, and she focuses primarily on topics such as homeschooling, parenting, health, science, and business. When not writing or spending time with her four children, Nicole enjoys reading, camping, and going to the beach.

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Discussion Comments


GreenWeaver- I just wanted to say that there are some banks that are offering stockbroker and investment services to their clientele.

Bank of America now offers brokerage services through Merrill Lynch. They have two types of accounts. One is self directed which is predominately online and the other is managed through Merrill Lynch.

They do require a minimum investment of $25,000 in order to purse the active management services through Merrill Lynch.

The branch will have the representative from Merrill Lynch call you to set up an account and they are the best brokerage house around.

Other banks like Chase and HSBC offer investment services through their licensed staff. This makes investing and banking really easy and it gives the bank an opportunity to create a better banking relationship with their customers. I really like that approach.


Crispety - I think that if you are buying an index fund then you could probably just go with an online broker like TD Ameritrade or E Trade.

You might even go directly to the fund family and buy it through them. For example, if you are looking to buy an index fund that encompasses the entire US stock market, you might consider the Vanguard Total Stock Market Index, or the Vanguard S &P 500 Index.

These funds have small expense ratios and are diversified. You can call the company and obtain a prospectus and this will tell you everything about the fund including the holdings and management.

You can also look at the site called Morningstar that rates your fund and compare it to others in the same investment category.

This site can also give you the investment performance for the one, five and ten year timeframe.

If feel that this is overwhelming then you can also buy from a stock brokerage house but make sure to get recommendations from friends and relatives because you will want to have a good relationship with this person.

That is what I would do.


I think that it is a great idea to set up a brokerage account if you are looking to buy complicated investments like annuities or municipal bonds.

These investment firms can help you decide which investments fit your risk profile. Most investment firms provide a risk analysis assessment to determine your ideal level of risk.

They also take into consideration that time horizon available for the money.

For example, if you are looking to buy municipal bonds, the broker will inform you of the various bonds available as well as their rating status.

They will also inform you on the differences between general obligation and revenue bonds. A more conservative investor would look at general obligation funds from a state that is more financially sound.

For example, investing in a municipal bond from California is not the same as investing in a municipal bond from Texas. Since California is bankrupt this bond is much riskier to invest in.

If you are interested in bonds it is a good idea to look at firms that specialize in selling bonds like a Cantor Fitzgerald because they are experts in this field.

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