Investors’ Perceptions of Full-Service Versus Discount Security Brokerage Firms

Over the past several years, discount brokerage houses have experienced rapid growth and development. It is estimated that the discount brokers1 market share has experienced a 55% to 65% annual growth rate since 1975. This event has been made possible by the relaxation of the previously fixed commission schedules and the introduction of price and service competition into the securities business. Instead of discount competition encouraging the full-service brokers to cut their commission rates to attract individual retail investors, the "Mayday" decision resulted in higher charges to the small investor. The full-line firms stress the continued importance of "brand" identification, and they feel that this gives them a competitive edge.