Types of Broker and How They Differ
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In short
The familiar categories — full-service, discount, online, robo — are useful for orientation and misleading for almost anything else.
Scope. MarketClue names no broker, compares none and recommends none. This article explains the categories in common use, why they describe less than they appear to, and the four structural questions that actually distinguish one firm from another. MarketClue is not a broker — it holds no client assets, executes no orders and routes no order flow. United States primary, verified 16 August 2026.
They describe a price point and an interface. They do not reliably describe what a firm does, how it is paid, or what it owes the customer.
The categories, as they are used
Full-service. A firm offering advice, research, planning and a named individual to speak to, historically charging commissions and now more often a percentage of assets.
Discount and self-directed. A firm executing what the customer instructs, without advice, at a lower stated price.
Online or app-first. A self-directed firm distinguished mainly by how the service is delivered.
Robo-adviser. An automated service that allocates and rebalances according to a model, typically after a questionnaire.
Wirehouse and independent. A distinction about whether the person giving advice is an employee of a large integrated firm or operates their own practice with a firm behind them.
Prime broker. An institutional service — financing, securities lending, consolidated reporting — for professional investors, appearing here only because the term is encountered.
Why the labels describe less than they used to
The categories have converged, and the convergence is nearly complete. Discount firms offer advice. Full-service firms offer self-directed accounts. App-first firms offer managed portfolios. Robo-advisers offer human consultations. A single organisation frequently contains all of them, sold under one brand and operated through more than one legal entity.
The label therefore tells a reader what a service costs and what it looks like, and does not tell them what governs it. Two customers of the same brand can be in entirely different legal relationships depending on which account they opened — which is the subject of Broker-Dealers, Investment Advisers and the Standards That Apply.
The four questions that do distinguish firms
Does the firm hold the assets, or does another firm? The introducing-versus-clearing distinction from What a Brokerage Actually Does. It determines who has custody, whose failure would matter and which protections apply.
Does the firm give advice, or only execute? Not what the marketing says — whether a recommendation is actually being made, since that is the event most obligations attach to.
How is the firm paid? Commission, asset percentage, subscription, spread, or the invisible sources set out in What a Brokerage Actually Does. This determines what the firm is structurally interested in and is frequently the most informative of the four.
What is it registered as? A broker-dealer, an investment adviser, or both — which determines the standard of conduct owed, and is covered in Broker-Dealers, Investment Advisers and the Standards That Apply.
Worked example
Why "advice" is the hinge, and why it is harder to locate than it sounds. Most obligations in this area attach to a recommendation rather than to a relationship, so whether one occurred is the question that determines what was owed. And a recommendation is not always announced as one. A list presented as "popular with investors like you", a default ordering, a prompt, a curated selection — each of these may or may not constitute a recommendation depending on how it is constructed, and the answer is not obvious from the customer's side of the screen. This portal takes no view on where any particular firm's line falls. The point for a reader is that the presence or absence of advice is a legal fact with consequences, not a description of how helpful a service feels.
Frequently asked
8 questions
What are the main types of broker?
Full-service, discount and self-directed, online or app-first, robo-advisers, wirehouse and independent arrangements, and prime brokers for institutions. The categories describe a price point and an interface more than anything structural.
Why are the labels less useful than they were?
Because the categories have converged almost completely. Discount firms offer advice, full-service firms offer self-directed accounts, app-first firms offer managed portfolios, and a single organisation often contains all of them under one brand and several legal entities.
Can two customers of the same brand be in different legal relationships?
Yes, depending on which account they opened and whether advice is being given. The brand does not determine the standard that applies.
What actually distinguishes one firm from another?
Whether it holds the assets or another firm does; whether it gives advice or only executes; how it is paid; and what it is registered as. The third is often the most informative and the fourth determines what is owed.
Why does it matter whether advice is being given?
Because most obligations attach to a recommendation rather than to a relationship, so whether one occurred determines what was owed.
Is a curated list a recommendation?
It may be, depending on how it is constructed — and the answer is not obvious from the customer's side of the screen. A default ordering, a prompt or a "popular with investors like you" selection can each carry more weight than they appear to.
What is a prime broker?
An institutional service providing financing, securities lending and consolidated reporting to professional investors. It appears here only because the term is encountered.
Does MarketClue list or categorise brokers?
No. It names none, assigns none to categories, compares none and publishes no directory or curated selection, because a curated list is a recommendation in substance whatever it is labelled.
References
- FINRA — SEC Regulation Best Interest and Form CRS: What You Need to Know —
- Investor.gov (SEC) — Working with an Investment Professional (broker-dealer and adviser distinctions) —
- Investor.gov (SEC) — Robo-Advisers —
Educational and informational only — not investment advice, a recommendation, or an offer to buy or sell any security. Investing involves risk, including the possible loss of principal. Worked examples use fictional companies and figures.