Commission

AAA

DEFINITION of 'Commission'

A service charge assessed by a broker or investment advisor in return for providing investment advice and/or handling the purchase or sale of a security. Most major, full-service brokerages derive most of their profits from charging commissions on client transactions. Commissions vary widely from brokerage to brokerage.

INVESTOPEDIA EXPLAINS 'Commission'

The brokerage with the lowest commissions is not necessarily the best one. Discount brokerages offer no advice, which can prove to be troublesome for many rookie investors. On the other hand, full-service brokerages offer a more personalized service, but commissions are much higher.

However, when commission is charged there is the potential for a conflict of interest to develop between brokerages and their clients. Because commission compensated brokers will not get paid very much if their clients do not conduct many transactions, unethical brokers may encourage clients to conduct more trades than necessary.

RELATED TERMS
  1. Flat Dollar

    A fixed dollar amount, generally in the context of fees or commissions ...
  2. Commission Broker

    Someone who gets paid by the brokerage company for which he works ...
  3. May Day

    Refers to May 1, 1975, when brokerages changed from a fixed commission ...
  4. Broker

    1. An individual or firm that charges a fee or commission for ...
  5. Discount Broker

    A stockbroker who carries out buy and sell orders at a reduced ...
  6. Sales Charge

    A commission paid by an investor on his or her investment in ...
Related Articles
  1. Personal Finance

    What's the average salary of a loan officer?

    Read about the average yearly salary for a loan officer. Learn about what these professionals do and what determines their pay rate.
  2. Home & Auto

    Do real estate agents get paid hourly or by salary?

    Learn about real estate commissions and how real estate agents, including listing agents, buyer's agents and real estate brokers, get paid, .
  3. Personal Finance

    Do real estate agents work on weekends?

    Learn how working weekends and evenings is one way real estate agents increase their chances of making a sale to a potential client.
  4. Home & Auto

    How do real estate agents get paid?

    Know that real estate agents are not always treated fairly by brokers and must take a broker to court if they are not paid in a timely manner.
  5. Investing

    How much more will it cost me to buy an odd lot of shares?

    A round lot is a predetermined number of shares of stock - usually 100 shares, while an odd lot refers to any number of shares that is not evenly divisible by 100 (usually less than 100).Odd ...
  6. Active Trading

    Get Positive Earnings In The Negative-Sum Market

    Gain an advantage in the markets by understanding how to win in a negative-sum game.
  7. a list of questions and actions that will help ensure that neither your broker, nor your brokerage firm, is ripping you off
    Brokers

    Evaluating Your Stock Broker

    Make sure you're getting the best service by staying informed and involved.
  8. The forex market, unlike other exchange-driven markets, has a unique feature that many market makers use to entice traders.
    Forex Education

    How To Pay Your Forex Broker

    Three types of commissions are used in this market. Learn how to get the best deal.
  9. Mutual Funds & ETFs

    5 Common Misconceptions About ETFs

    The rise in these funds' popularity has contributed to misinformation about what they are and how they work. Learn more here.
  10. Investing Basics

    Paying Your Investment Advisor - Fees Or Commissions?

    The way a professional is compensated can affect quality of service. Learn more here.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center