A stockbroker is an individual or company qualified enough to trade securities in the financial markets on behalf of financial institutions, individual and institutional investors, and organizations. They can work either independently as a professional trader or broker-dealer or associate with a brokerage firm. Stockbrokers are licensed agents who represent individuals or organizations in financial transactions that deal with stocks. They also may call themselves investment consultants or financial consultants. Stocks give a person ownership in a company.
A stockbroker should be knowledgeable, be good with numbers, have excellent relational skills and give attention to details. His work enables him to increase his client’s financial portfolios while at the same time earning him a living. Stockbrokers are independent professional traders or brokerage firms buying or selling securities on behalf of investors. In return, they receive a flat fee or percentage of the asset sale or purchase price as commission. Being a registered representative is a provision under the Security and Exchange Commission (SEC) guidelines or the Financial Industry Regulatory Authority (FINRA). Aspiring candidates must be finance or business administration graduates. In addition, they must pass the Series 7 and the SIE examinations to gain a license to work as general securities representatives. There are three categories of broker-dealers based on investors’ trading requirements – full-service, discount service, and no advice.
Role and Importance of Stock Brokers
Apart from buying and selling stocks for clients, the role of stock brokers has evolved in a big way over the last decade. They help investors wade through the whole investment process, provide research-based advice on stocks to facilitate decision making, offer assistance to invest in alternative investment assets, IPOs and mutual fund schemes. In the modern era of FinTech, stock brokers are striving to make stock market investments simple and easy by introducing new-age technologies. Like for example, today most stock brokers offer a mobile application that enables you to buy or sell shares in a single click within seconds, keep a track of your investments, create watch lists, interact with the community and do so much more. In fact, few brokers also extend financing facilities for investors to take leverage positions. We can say that today stock brokers have transformed themselves to become a one-stop investment solution provide
Responsibility of Stockbroker Job
Even though investors can purchase shares directly from their issuer, they cannot buy or sell securities directly in a stock exchange. Hence, they need to connect with individual brokers or broker-dealers, or stockbroker companies to trade stocks on their behalf. In addition to executing trades, they are responsible for providing investment management and financial advisory services. However, being a member of a stock exchange or stockbroking firm makes one eligible to trade directly on exchanges.
Being a broker-dealer is a provision under the U.S. Security and Exchange Commission (SEC) guidelines or the Financial Industry Regulatory Authority (FINRA). Besides in-person or as a firm, there are now online brokers that can handle securities trading automatically on behalf of retail investors and institutional investors and charge much lower fees.
Becoming a broker-dealer involves a great deal of effort, from acquiring relevant educational qualifications to obtaining the required license. Let us look at their responsibilities in quick points:
- Buying and selling shares, stocks, and other securities on behalf of investors
- Analyzing and interpreting financial reports
- Advising clients on investment strategies based on market conditions
- Managing the investment portfolio of investors
- Following the latest trends and news in the stock market
- Recommending clients about potential investment opportunities
Often referred to as a registered representative or investment advisor, a stockbroker can open a separate trading account to assist firms in purchasing shares.
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