What Do Stock Brokers Do?

In order to invest in the stock market you need to contact a stock broker so that you can buy or sell stocks. You can buy stocks directly from companies, although for most stocks, you will need to go through a broker.

Stock brokers can be organisations such as Charles Schwab or Merrill Lynch, or they can be individuals who work for such brokerage firms.

What Is The Role Of A Stock Broker?

The main role of a stock broker involves the buying and selling of securities. In stock market lingo, securities refer to financial or paper investments, of which, stocks are only a small part. Stock brokers can also do several other things such as:

Give You Advice

Stock brokers can offer you paid advice which you can use to do research on which stocks to buy or sell.

Banking Services

Brokers can offer limited banking services such as interest bearing accounts, check writing, direct deposit and credit cards.

Brokering Other Securities

Stock brokers can also help you with other forms of investments, such as buying bonds and mutual fund options.

How Do Stock Brokers Make Money?

Personal stock brokers make money by helping other people to make investments and then charging a fee for their service. Some of the fees brokers can collect from you include:

Brokerage Commissions

If you use a stock broker to buy and sell stocks or other securities, you will be charged a fee.

Margin Interest Rates

If you borrow against your brokerage account to make other investments you will be charged interest.

Service Charges

Various administrative tasks such as mailing stocks in certificate form usually involve a small service charge.

What Stock Broker Should You Invest With?

Any stock broker you choose to do business with should be registered with the National Association of Securities Dealers (NASD) and the Securities and Exchange Commission (SEC).

To protect your money after you have put it into a brokerage account, look for brokers who are also a member of the Securities Investor Protection Corporation (SIPC).

However it is important to remember that this won’t protect you against market losses, only if that brokerage firms goes out of business.

Personal Vs Institutional Stockbroker

Finally, it is important to know the difference between a personal stockbroker and an institutional stockbroker.

Institutional brokers make their money from companies and institutions through investment banking, advisory services and other broker services.

Personal stockbrokers usually offer the same kinds of services, but they deal mainly with individuals and small businesses.