Commission

The fee a brokerage firm is paid for executing a trade. Full-service brokerages offer more personalized advice so their commissions are higher. Discount brokerages offer no advice at all, and thus have a lower commission.

Depending on what an investor needs, he should choose a type of brokerage that suits himself. A trader should keep commission costs in mind because frequent trading can rack up heavy commissions(even if the commission per trade is low).

Large commissions at full service brokerages may lead to potential conflicts of interest as the brokerage makes most of its money from commissions and clients from buying and holding. The brokerage may encourage clients to trade more than necessary in order to make money off commissions.

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