What Is a Brokerage Account

A brokerage account is an arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through the brokerage, which then carries out the transactions on the investor’s behalf. The investor owns the assets contained in the brokerage account and must usually claim as income any capital gains he or she incurs from the account.

If you want to save, you open a savings (or money market) account. If you want to invest, you need a brokerage account.

A brokerage account allows you to buy and sell everything from stocks and bonds to mutual funds, currency, futures and options contracts, depending on the broker. Over the long term, the return on a diversified investment portfolio is much greater than a savings account interest rate, which likely won’t beat inflation.

They differ from savings accounts in the following ways:

Savings accounts don’t offer you access to investments; instead, you’ll earn an interest rate on money deposited.

The money in a savings account is FDIC insured up to $250,000 per depositor, per insured bank.

FDIC coverage does not insure investments, including stocks, bonds and mutual funds. Brokerage accounts carry a different kind of coverage, called SIPC. This coverage protects customers if a SIPC-member broker fails, but it does not protect against investment losses. SIPC coverage is up to $500,000 per customer per institution, with a $250,000 limit on cash.

Benefits

Maximum flexibility to invest in thousands of publicly traded securities including stocks, bonds, mutual funds, exchange-traded funds (ETFs), U.S. Treasuries, Brokered CDs or unit investment trusts (UITs).

Professional advice and management to create and maintain a personalized investment plan
Flexibility in titling your account
Online account access and trading
Detailed monthly statements and a comprehensive year-end tax statement
Automatically pay for purchases from, or have sales proceeds credited to, your Commerce bank account
Receive more than SIPC account protection

Key similarities

There are also some key similarities:

You can deposit as much money as you’d like and withdraw that money at any time (though, with a brokerage account, you may have to sell investments to do so).

You can set up automatic transfers from another bank or brokerage account, or deposit checks via mail or, in some cases, a mobile app.

Like banks, many brokerages also offer checking accounts. You wouldn’t purchase investments through a brokerage checking account, but it could be linked to your investment account, making for easy transfers back and forth.

Types of Brokerage Accounts

A customer’s account at a brokerage. There are three kinds of brokerage accounts. The most basic kind is a cash-management account, into which investors place money in order to make trades. There must be enough money in the account to cover the trade at the time of its execution (including both the price of the security and the commission), or the investor must be able to pay for the trade within three days (which is called the settlement date). Some brokerage firms accept credit cards to fund cash accounts, but the most require cash or a personal check.

Such an account is often a good substitute for a bank account. A second, more sophisticated kind of brokerage account is a margin account, which allows an investor to buy securities with money borrowed from the broker. The Federal Reserve limits margin borrowing to at most 50% of the amount invested, but some brokerages have even stricter requirements, especially for volatile stocks. brokerages charge a relatively low interest rate on margin loans in order to encourage investors to buy on margin. A third kind of brokerage account is a discretionary account, which permits the broker to buy and sell shares for the investor without first contacting the investor for approval.

Brokerage Bank Account and services

The Brokerage Department of the banks we work with offer high-quality brokerage services, based on their modern technological infrastructure, the professionalism, and integrity of its brokers and investment advisers, as well as the development of innovative investment products, all of which provide investors with broad access to the major international stock markets.

Their Departments serves a large number of customers who are worldwide scattered by receiving and transmitting, on a daily basis, a large volume of orders. The broad customer base of the Company is the key element of its constant growth.

Their Brokerage Departments provide, among others, the following services:

Order Reception, Transmission and Execution

The reception and processing of orders for trading stocks is made through a fully automated electronic system. Orders for the purchase or sale of securities of public listed companies can be processed:

Through their central and district offices
On the internet through
By telephone calls (phone calls are recorded)
By fax
Through any Bank branch.

Following the termination of the daily trading session, customers are immediately informed about the outcome of their orders by phone, SMS, or fax, as per their instructions.

Advisory Services on Investment Issues

The experience and professional training of the Company’s brokers and investment advisers, as well as the specially trained Research Department analysts of the Company/Group, enable the provision of accurate information on the latest economic and globally developments, information regarding listed companies, as well as investment advice tailored to the specific investment needs of its brokerage clients.

Should you require additional information, please contact one of our Consultants who will be happy to assist with your enquiries.