Big Firms are More Likely to Discount

Larger firms offer deeper discounts on commissions than smaller ones, according to a recent Securities Industry Association survey.

Larger firms offer deeper discounts on commissions than smaller ones, according to a recent Securities Industry Association survey. While the median price on commissions was about the same regardless of size, firms with more than 600 reps were more likely to drop prices, according to the survey.

The median commission for a sale of 2,000 shares of stock trading at $10 was $486. For firms with more than 600 reps, that figure was $491; for smaller firms, it was $480.

But when it comes to the lowest reported charge, the difference between large and small is significant: $180 vs. $457. Most discounts fell in the 25 percent range, more than the 20 percent average in 1998.

Reasons for Discounting %age
Total Relationship with Client 34.9
New Reps 16.3
Client Suggestion/Request 14
Competition from Discount Firms 9.3
Competition in Major Metro Areas 9.3
Increased Discounting This Year 9.3
Branch Manager Discretion 7
Source: Securities Industry Association

There are myriad reasons for discounting (see chart). Bigger firms said they cut prices more in big metropolitan areas to compete with discounters and new reps discount to bring in business. The survey, conducted every three years, is available through the Securities Industry Association.

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