Even though brokerage firms may be getting more consumer friendly with their pricing models, for some the costs involved are still too high to consider paying. Thankfully, paying brokerage fees isn’t a necessity for those who wish to sell shares, as you can now sell shares without the services of a stockbroker. Many companies are now open to both purchasing and selling shares directly, eliminating the need for stockbrokers and broker’s fees. Even though selling shares without a broker does have a whole host of financial advantages, it is important to remember that there are also limitations that need to be addressed.
Direct Stock Purchase (DSP)
Larger companies have been working for years to cut brokers out of the share trading equation. One way they have done this is via DSP. DSP allows those who have shares to bypass stockbrokers and the fees involved when they sell shares. In order to do this you will need to have shares in a company that offers DSP and contribute to the minimum monthly amount, which is stated in their terms and conditions. Companies will use a third-party bank to debit and credit your account directly, via the purchasing and sale of shares.
Dividend Reinvestment Plan (DRIP)
Some companies opt out of offering DSP and offer a DRIP instead, in order to allow investors to sell shares without a broker. A DRIP is similar to a DSP in the sense that share transactions are handled directly via the company to avoid additional fees. When you operate via a DRIP, the company you hold shares in will purchase more shares with the dividend amount issued. A DRIP allows for simple acquisition and sale of shares via a structure that those who have used a DSP will be familiar with. DRIPs are considered a long-term option for those who have and want to continue a long term relationship with a company.
There are plenty of specialist share services around that allow you to sell single stocks without the need for a broker. These specialist services require research prior to initiating a trade for security reasons. Services such as this don’t limit you to sales within a single company, they open the door to selling shares in over 200 companies, many of which feature on the Fortune 500 index.
Pros and Cons
What appeals most about choosing to sell shares without a broker is the money that can be saved. Small investors can stretch their funds via the use of a DSP, DRIP or specialist service, meaning more cash in your pocket to reinvest elsewhere. However, choosing to operate without a broker isn’t without its limitations, selling stock without guidance means that it may take longer to get a trade executed. You will need to submit paperwork to a plan administrator yourself, which can be a time consuming process at the best of times. When you choose to sell shares without a broker, there are plenty of ways to do so and is a viable option for those who want to cut trading costs.