What Are Securities Brokers?

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What Are Securities Brokers?

What they do

All securities brokers buy and sell securities for their customers. They typically work as sales representatives of brokerage firms, and may be known as registered representatives, stockbrokers, or account executives. Dealers are investment firms that buy securities for their own inventory and resell those securities to customers. When brokers buy and sell securities for their firms’ own accounts, they are functioning as dealers; brokers may also serve as go-betweens, arranging transactions between the buyers and the sellers of securities. All brokers charge for their services. They may be paid by commission (a charge levied on each transaction, usually based on a percentage of the transaction) or collect a periodic fee based on the value of the holdings in a customer’s account—sometimes referred to as a "wrap fee."

Things To Know

  • Brokers are grouped into two basic categories, depending on the kind and degree of service they provide.

The two main types of brokers

Brokers are grouped into two basic categories, depending on the kind and degree of service they provide. Discount brokers simply process your transaction order: they buy and sell what you tell them to buy and sell, when you tell them to do it. Full-service brokers provide that service too, but can also provide a wide range of other services as well, including research, advice, and recommendations on which stocks to buy and sell. Compared to discount brokers, full-service brokers typically charge higher fees or commissions for the extra service they provide.