Commission

Definition

The fee charged by a broker or investment adviser in exchange for investment advice and/or handling the purchase or sale of a security. Commission(s) can vary from brokerage to brokerage.

Details on Commission

There are two basic types of broker. Discount brokerages offer little or no advice. These type of brokerage companies can be problematic for rookie investors but save a lot of money for those who have a basic understanding of the market. On the other hand, full-service brokerages offer more services, but commissions are much higher.

There is potential for a conflict of interest between brokerages and their clients when a commission is charged. For agents that make most of their money from commissions, they do not get paid if their clients do not do regular trades. Unethical brokers have been accused of encouraging clients to conduct more trades than necessary.