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25.4.1 Full-service Brokerage Accounts

Comprehensive guide on full-service brokerage accounts including their fee structure, benefits, criteria, and additional services.

Overview of Full-service Brokerage Accounts

Full-service brokerage accounts combine financial planning services with trading capabilities for clients. These services are wrapped up in a fee structure based on the client’s assets under management (AUM).

Fee Structure

Fees for full-service brokerage accounts typically range from 1.0% to 2.5% of the AUM. The annual fee is generally paid quarterly out of the cash held in the account. The specific amount is determined based on the following criteria:

  • Dollar Size of Account: Larger accounts may have lower fee percentages due to economies of scale.
  • Estimated Number of Trades: More frequent trades might result in higher fees unless the account offers unlimited trading.
  • Type of Investment: The investment type (e.g., equity, bonds, money markets, mutual funds, or guaranteed investment certificates (GICs)) can influence the fee.
  • Ancillary Services Provided: Additional services such as financial planning, estate planning, and wealth management may raise the fee.

Typical Services Included

Ancillary Services

Some of the ancillary services offered in addition to trading include:

  • Financial Planning: Comprehensive advice on investments, savings, and spending strategies.
  • Estate Planning: Guidance on managing estate assets and trusts to minimize taxes and ensure financial stability for dependents.
  • Wealth Management: Sophisticated investment strategies and planning to preserve and grow wealth over the long term.

Types of Full-service Brokerage Accounts

Many investment dealers offer tiered levels of service within their full-service brokerage accounts. These tiers generally include:

Basic Level

  • Services: Standard financial planning and a limited number of free trades.
  • Fees: Closer to 2.5% of AUM.

Higher Level

  • Services: More comprehensive financial planning and unlimited free trades.
  • Fees: Around 1.0% - 1.5% of AUM.

Important Considerations

When choosing a full-service brokerage account, consider:

  • The total cost considering the fee percentage and services needed.
  • The credibility and credentials of the financial planners managing the account.
  • Specific needs for ancillary services.

Pros and Cons

Pros Cons
Comprehensive financial and investment planning Higher fees compared to discount brokers
Personalized financial advice Potential for conflicts of interest
Access to a wide range of services

Key Terms Glossary

  • Assets Under Management (AUM): The total market value of the investments that a financial institution manages on behalf of clients.
  • Equity: Stocks or any other securities representing an ownership interest.
  • Bonds: Debt securities issued by corporations or governments to raise capital. They pay interest over time.
  • Money Market: Sector of the financial market in which financial instruments with high liquidity and short maturities are traded.
  • Mutual Funds: Investment programs funded by shareholders that trade in diversified holdings and are professionally managed.
  • Guaranteed Investment Certificate (GIC): Canadian investment that offers a guaranteed rate of return over a fixed period.

Further Reading


What is Generally Included in a Full-service Brokerage Account?

These accounts often include professional financial planning, regular reviews, diverse investment options, and additional services such as tax planning and estate planning.

Are Full-service Brokerage Accounts Worth the Higher Fees?

It depends on your financial needs and investment goals. If you require extensive planning and multiple ancillary services, the benefits might outweigh the fees. Conversely, if you are comfortable managing your own investments, a lower-cost or discount option might be more suitable.

How Do the Fees for Full-service Brokerage Accounts Compare to Others?

Full-service brokerage fees are higher than those charged by discount brokers due to the additional services provided. It’s key to evaluate these costs against the services you need.

CSC® Exams Practice Questions

📚✨ CSC Exam Questions ✨📚

Welcome to the Knowledge Checkpoint! You'll find 10 carefully curated CSC exam practice questions designed to reinforce the key concepts covered. These questions will help you gauge your grasp of the material, identify areas that need further review, and ensure you're on the right track towards mastering the content for the Canadian Securities certification exams. Take your time, think critically, and use these quizzes as a tool to enhance your learning journey. 📘✨

Good luck!

## What is a key feature of full-service brokerage accounts? - [ ] Free financial services without trading capabilities - [x] Financial planning services combined with a fixed or unlimited number of trades - [ ] Higher interest rates on deposits - [ ] Reduced transaction fees for self-directed trading > **Explanation:** Full-service brokerage accounts bundle financial planning services with trading capabilities, often charging a fee based on assets under management. ## What is the typical range of fees charged for full-service brokerage accounts? - [ ] 0.5% to 1.5% of assets under management - [ ] 2.0% to 3.5% of assets under management - [x] 1.0% to 2.5% of assets under management - [ ] A flat fee independent of assets > **Explanation:** Fees for full-service brokerage accounts typically range from 1.0% to 2.5% of the client's assets under management. ## How is the annual fee for full-service brokerage accounts usually paid? - [ ] As a single annual lump sum - [ ] Monthly out of the client's bank account - [x] Quarterly out of cash held in the brokerage account - [ ] Annually through personal check > **Explanation:** The annual fee for full-service brokerage accounts is usually paid quarterly, directly from the cash available in the brokerage account. ## Which factor does NOT influence the amount of the fee charged in a full-service brokerage account? - [ ] Dollar size of the account - [ ] Type of investments held in the account - [ ] Ancillary services provided - [x] The client's employment status > **Explanation:** The fee is influenced by the account size, type of investments, and ancillary services but not by the client's employment status. ## Which type of investment could impact the fees in a full-service brokerage account? - [ ] Employment equity - [x] Bonds - [ ] Real estate property - [ ] Commodities > **Explanation:** Types of investments, such as bonds, equity, money market instruments, and mutual funds, can impact the fees charged for full-service brokerage accounts. ## What is one of the ancillary services that might affect the fee in a full-service brokerage account? - [ ] Mortgage consultation - [ ] Credit card issuance - [x] Estate planning - [ ] Tax filing > **Explanation:** Ancillary services like estate planning can affect the fees in a full-service brokerage account. ## How do some investment dealers differentiate levels of fee-based accounts? - [ ] By offering custom branding on accounts - [ ] By providing exclusive access to specific stocks - [x] By offering more or unlimited free trading at higher levels - [ ] By providing personal concierge services > **Explanation:** Some investment dealers offer different levels of fee-based accounts, where higher levels typically include more, or unlimited, free trading. ## What percentage of the annual fee is commonly paid quarterly in a full-service brokerage account? - [ ] 75% - [ ] 25% - [x] 100% - [ ] 50% > **Explanation:** The annual fee, though expressed as an annual percentage, is commonly paid quarterly, meaning 100% of the fee is distributed over the four quarters of the year. ## Which of the following is a primary criterion affecting the fee amount in full-service brokerage accounts? - [ ] Number of banking products owned by the client - [ ] The client's age - [x] Estimated number of trades - [ ] The client's tenure with the brokerage firm > **Explanation:** The estimated number of trades is one of the primary criteria affecting the fee amount in full-service brokerage accounts. ## What fee model is typically used in full-service brokerage accounts? - [ ] A flat annual fee - [x] A percentage of assets under management - [ ] A per-trade fee - [ ] A fee based solely on account tenure > **Explanation:** Full-service brokerage accounts typically use a fee model based on a percentage of assets under management.

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Sunday, July 21, 2024