What is a Stockbroker?
A stockbroker is a financial professional who executes orders in the stock market on behalf of their clients, serving as intermediaries between markets (e.g. stock exchanges) and the private (retail) investors. Brokers take orders from customers and attempt to execute them at the best possible price. For this service they earn commission in the form of a fee. Many stockbrokers also now act as financial advisors as the majority of online brokerage platforms now allow users to execute their own orders through the web or mobile app.
The majority of stockbrokers are employed by brokerage firms and deal with large and specialised orders for institutional clients and high-net-worth individuals. Some stockbrokers work for investment banks or specialised brokerage firms and can see a large proportion of their salary come in the form of performance based commission although this can vary from employer to employer.
The term ‘stockbroker’ does not always refer to an individual broker as brokerage firms and broker-dealer companies can also be referred to as stockbrokers. These include both full-service brokers and discount brokers, who purely execute trades but do not offer investing advice.
Most online brokers are discount brokers offering a basic level of service in which trades are executed for free or for a small set-price commission. Many online brokers now offer premium services options which charge higher fees.
What Do Stockbrokers Do?
Buying or selling stocks requires access to one of the major exchanges, such as the London Stock Exchange or New York Stock Exchange. They must be a member of the exchange or belong to a member firm authorised to trade on these exchanges. Member firms and many of the individuals who work for them are licensed as brokers or broker-dealers.
While individual investors can buy stock shares directly from the company that issues them, it is much simpler to work through a stockbroker.
It is now much cheaper to trade stocks and the rise of the internet and related technologies has opened opportunities for cheap, fast, and automated access to the markets allowing discount brokers to provide online services. The majority of accounts in today’s markets are managed by the account owners (retail investors) themselves via discount brokers.
Modern Stockbroking
Times have moved on and trading stocks is now relatively simple and much cheaper and quicker to execute than in the past. Many discount broker firms offer over-the-phone services and are available to answer clients’ questions. If a client is a premium services customer, they may have access to more detailed consultation and advice, such as research, advice, portfolio management, and so on…
A recent development in broker services is the introduction of robo-advisers. These are automated algorithmic investment management, which is carried out via the web or mobile app. Due to the lack of human involvement, it keeps fees low as there is minimal individual interaction.
Join Now