Glossary of Terms Used by Business Brokers and Advisors

Portfolio advisory service fees range from 0.50% to 1.50% based on the amount invested. Minimum investments range from $25,000 to $250,000 based on the investment options. For its automated Fidelity Go service, the firm charges a 0.35% advisory fee but requires no account minimum to open an account. Until recent years, getting access to the stock markets was prohibitively expensive. It was cost-effective only for high net-worth investors or large institutional investors, such as the managers of pension funds. They used full-service brokers and could pay hundreds of dollars for executing a trade.

Additionally, the Federal Reserve Board’s Regulation T governs how you use your cash account to purchase securities. Your brokerage firm must comply with Regulation T and can take action, such as putting restrictions on your ability to trade, if it determines that you incur a Regulation T violation. A brokerage firm is a business that serves as a transactional intermediary between a buyer and a seller. The firm earns its income from a commission collected for every finished deal. It can also function as a professional adviser for people who engage in trading securities. Because of the added services they offer, most traditional full-service brokerages charge a fee, commission or both.

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The online broker who offers free stock trades receives fees for other services, plus fees from the exchanges. A CBR is drafted by a brokerage firm or business broker to market a businesss to prospective buyers. It contains information about the business, including its products, markets, competition, and financial performance.

People who use full-service brokers want the advice and attention of an expert to guide their financial affairs. These are usually complex, as these clients tend to be high-net-worth individuals with complex financial affairs. They are willing and able to pay an average of 1% to 3% of their assets per year for the service. A captive brokerage is affiliated with or employed by a mutual fund company or insurance company and can sell only their products. These brokers are employed to recommend and sell the range of products that the mutual or insurance company owns.

Reproduction Cost New

See Amortization which is the corresponding accounting technique for intangible assets. As the intermediary between customers (insureds) and sellers (insurance companies), brokers play an important role. Some brokers may also conduct extra risk management services, helping them with recommendations on how to control risk outside of what insurance covers. These are important value-added services that can help create a better customer experience and generate additional revenue for the brokerage firm.

An document circulated to potential buyers of a specific business is for sale without disclosing the identity of the business. The documents, often prepared by an advisor, details information that is designed to entice potential buyers. A mathematical formula brokerage firm definition developed from the relationship between price and certain variables based on experience, observation, hearsay or a combination of these; usually industry specific. A rule of thumb is a common procedure or practice to empirically value a business.

Weighted Average Cost of Capital (WACC)

For regular stock orders, you might be charged up to $20 per trade, though many brokers have adopted a model where you pay an all-inclusive annual fee for all services. The process typically involves opening a brokerage account, in which you’ll provide standard information such as your name, contact info and bank information. Most brokerages let you open an account online, though in some cases you can visit a branch office to open an account in person.

• A customer may also enter into a short sale through a margin account, which involves the customer borrowing stock from a firm in order to sell it, hoping that the price will decline.
• In most cases, trading electronically is substantially less expensive than giving buy and sell orders by phone.
• They can consider a regional firm that falls between full-service brokerage firms and discount brokerage firms on the cost scale.
• A robo-advisor is an app or website that creates an investment portfolio for you based on your financial goals.
• Brokerage firms have the right to set their own maintenance margin requirements—often called “house” requirements—as long as they’re more stringent than the margin requirements under FINRA rules.
• Your firm is required to provide written disclosure of the terms of the loan, including the rate of interest and the method for computing interest.
• A captive brokerage is affiliated with or employed by a mutual fund company or insurance company and can sell only their products.

This is done by making regular additions to a fund sufficient to meet the estimated cost of additions to and replacements of the fixed assets when they come to the end of their useful life. In concept, the reserve for replacement is similar to the charge for depreciation. An investment vehicle, typically a Limited Partnership, formed to make investments in private companies via a pool of available equity capital. Business ownership refers to the control over an enterprise, providing the power to dictate the operations and functions. Liquidation value at which the asset or assets are sold over a reasonable period of time to maximize proceeds received.

Non-operating/Non-contributing Asset

A customer who purchases securities may pay for the securities in full or may borrow part of the purchase price from their securities firm. If the customer chooses to borrow funds from a firm, the customer must open a margin account with the firm. Brokerage account fees vary, as do the products and services a firm offers. A self-directed brokerage account is one where the client has complete control over their assets, and can invest in any asset they wish. This is different from an employer-sponsored retirement account, where the number of possible investments is more constrained.

The firm also offers clients a worry-free, passive approach to investing through its robo-advisor service called Intelligent Portfolios. The online platform provides clients with an automated experience, giving them access to a series of ETFs that rebalances per the client’s investment goals. The service requires a minimum $5,000 investment and comes with no advisory or commission fees. As of Jan. 2023, Charles Schwab held $7.5 trillion in client assets, with a total of 33.9 million active brokerage accounts.

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With Roth IRAs and Roth 401(k)s, contributions are made after you have paid income taxes, the money grows tax-free over time and you pay no taxes when you withdraw funds in retirement. A day trade occurs when you buy and sell (or sell and buy) the same security in a margin account on the same day. Specific margin requirements apply to day trading in any security, including options. If you use an online brokerage firm or mobile platform, this information-gathering likely won’t involve an actual financial professional.