What It Is:
A stockbroker is a person or a company that acts as an intermediary between buyers and sellers of stocks.
How It Works/Example:
Stockbrokers must have Series 7 and Series 63 licenses; other licenses are often required for specific types of . For example, some stockbrokers must also obtain a Series 3 license if they want to trade certain financial products such as futures and commodities. To obtain a Series 7 license, the applicant must pass the Series 7 exam (also called the Qualification Examination for General Securities Representative), which primarily covers the seven critical functions performed by registered representatives: seek business for the broker/dealer, evaluate customer needs and objectives, advise clients, manage customer accounts and account records, explain the securities markets and the factors that affect them, execute orders for clients and monitor client portfolios. The National Association of Securities Dealers administers the test.
There are many other types of brokers in the financial world. For example, a commodities specializes in trading commodities, a handles orders on the floor of a or commodities exchange and a offers brokerage services and sells other financial products such as insurance, or research conducted by other members of the brokerage firm. A essentially executes trades on behalf of customers and does little else. Brokers are not the same as research analysts, who analyze and make recommendations about certain .
Why It Matters:
Stockbrokers are some of the most important people in any liquidity and efficiency in the .because they bring buyers and sellers together and thus create
However, stockbroker commissions eat into returns, so investors should shop for a stockbroker that provides an appropriate level of service. For instance, the extra cost of amay be worth it for people who don't have the knowledge or inclination to stay on top of complicated or financial planning. Likewise, new investors or those with complex portfolios might find more comfort in full-service . Investors who hold their for a long time are usually less bothered by higher trading commissions because they don't trade that often.