Broker

Professionals who sell and buy financial securities for their clients

Author: Sacha Fiereder
Sacha Fiereder
Sacha Fiereder
Reviewed By: Parul Gupta
Parul Gupta
Parul Gupta
Working as a Chief Editor, customer support, and content moderator at Wall Street Oasis.
Last Updated:March 20, 2024

What Is A Broker?

Brokers are professionals who sell and buy financial securities (stocks, bonds, currencies, or commodities) for their clients.

When discussing brokers, we can also use the following terms: middle person, intermediary, agent, or mediator.

Individual and institutional investors need them to maximize their returns in the financial markets. This profession was created during the 18th century. In fact, during this period, commercial agents started to buy and sell shares of the East India Company.

Years after years, middle persons specialized in many types of securities and improved trading techniques to perform better and maximize their clients' profits.

Nowadays, the agent profession has changed because it includes different financial services, such as portfolio management, wealth management, financial market analysis, and user advisory services.

An intermediary can work in various fields, such as investment banks, online mediators, investment funds, wealth management firms, or other financial institutions.

They are decisive in the financial markets because they help investors make informed decisions about acquiring or selling stocks.

Besides, they offer tips on different things (market trends, stocks, bonds, risks), rewards of different types of investments, and the best trading strategies to set up. 

If you are a beginner investor, you can easily recognize a good agent by its ability to understand what you want and its advice on the financial markets.

Mediators have to pay attention to the multiple financial laws and legislations that command our financial system to protect the interests of their users.

Suppose your dream is to become a middle person. In that case, you should have specific skills such as a strong knowledge of the financial markets or an ability to analyze financial trends and data. In addition, knowing how to converse with investors is very practical.

This article aims to discover the brokerage profession by focusing on the tasks and responsibilities of them, but also the aptitudes and qualities required to succeed in this domain and the advantages and disadvantages of it.

We will also discuss the future prospects of the agent profession in the era of digitalization and automation. A middle person is a dynamic and energetic profession that offers many challenges and opportunities throughout the career.

If you feel concerned about the financial markets and are ready to challenge yourself by advising investors on their investments, then you can be sure that this profession will be the perfect career choice.

Key Takeaways

  • Brokers act as intermediaries, facilitating the buying and selling of financial securities for clients.
  •  Brokers have evolved to offer a wide range of financial services beyond mere trading, including portfolio management, wealth management, and financial market analysis.
  • Brokers can work in various settings such as investment banks, online platforms, investment funds, and wealth management firms.
  • Brokers play a crucial role in helping investors make informed decisions about their investments, providing insights on market trends, risks, and strategies.

Brokers Tasks and Responsibilities

As we said at the beginning of this article, agents are financial market professionals whose job consists in buying or selling financial products for their customers. Buying or selling products is not a unique part of the job because they also have other crucial duties to perform.

This profession can be described in four main tasks and responsibilities:

1. Buying and selling securities

As we have seen previously, the major task of the agents is to buy or sell products for the customers. They make transactions for them in the financial markets, using online trading platforms or through stock brokers.

The mediators are up to buying and selling different products, such as stocks, bonds, currencies, or commodities.

When customers want to acquire something, at that moment intermediaries need to make sure that they buy it at the best price. Therefore, agents keep an eye on the market trends and use some technical or fundamental analysis to determine the best time to buy or sell stocks.

Mediators should also pay attention to the costs linked with buying and selling stocks (commissions, taxes, foreign exchange fees, etc.).

2. Analyze the financial markets

Agents are in control of analyzing the financial markets and gathering data to help their clients to make the best decisions. Mediators must look at market trends and follow the economic news to understand the forces influencing stock prices.

Middle persons use technical and professional analysis to evaluate the performance of securities. The technical analysis involves studying price charts and identifying trends and patterns.

Note

The fundamental analysis is great for evaluating a company's financial data (earnings, revenues, and financial ratios) but also for determining whether a company is undervalued.

3. Brokerage

Agents have a good knowledge of the markets, so they become negotiators. Therefore, they must be able to negotiate the best possible prices for securities while considering current market conditions.

Intermediaries may also use trading techniques to obtain favorable prices for their clients, such as trading limit orders or using complex trading strategies.

4. Advising clients

Brokers are financial advisors to their customers. They support their clients in making informed decisions about their investments by providing advice on the various investment options accessible.

Intermediaries must be prepared to understand their client's investment objectives, risk tolerance, and time horizon to furnish personalized recommendations.

Further, they must consider their customers' liquidity, income, and growth needs to provide them with investment strategies suitable for their risk profile.

Middle persons must explain to their users the risks associated with investments and provide them with accurate and transparent information on the associated costs of the trade.

Advantages and Disadvantages of Being a Broker

The brokerage business can offer considerable advantages but has some significant disadvantages. Here is a recap of the principal pros and cons of being an agent.

The advantages are:

1. High-income potential

Brokerage can offer high-income potential. Intermediaries are often compensated by commissions on the trades they make for their customers. 

The more trades they make, the higher their income. Middle persons who work for financial companies or brokerage firms may also receive bonuses based on their performance.

2. Career Opportunities

Brokerage offers many career opportunities. Agents can evolve in various environments, including banks, mediator firms, and investment consulting firms.

Intermediaries can also advance their careers by obtaining professional certifications, expanding their client base, and developing asset management skills.

3. Continuous Learning

The intermediary profession offers an opportunity for continuous learning. Agents must constantly keep abreast of market trends, economic news, and technological developments to provide accurate and reliable advice to their users. 

Intermediaries can also train and obtain certifications to improve their skills and expertise.

Furthermore, the drawbacks are:

1. Stress and pressure

Being a middle person can be very stressful and demanding. Agents must work under pressure to provide accurate and reliable advice to their clients. They also have to judge the volatility of the financial markets and fluctuations in the costs of securities, which can be very stressful.

Note

In finance, most jobs are stressful because they require you to be reactive and rigorous.

2. Long working hours

The brokerage business can require long working hours. Middle persons often have to work irregular hours to meet the needs of their clients. They may also be required to work on weekends and holidays to keep up with the global financial markets.

3. Financial Risks

The intermediary business presents significant financial risks. For example, agents may suffer significant financial losses if their users’ investments do not perform as expected. They may also confront legal and regulatory risks if they fail to comply with applicable laws and rules.

4. Conflicts of Interest

The brokerage business may also present potential conflicts of interest. For example, intermediaries may be tempted to suggest investments that do not maximize the users' profit but offer financial benefits to themselves or their businesses. 

They must be aware of these potential conflicts of interest and act ethically to protect their customers’ interests.

The mediator business offers significant advantages and disadvantages. Agents can earn high incomes, enjoy career opportunities and continue to learn throughout their careers.

Online Brokers

There are many online mediators, but here are the main ones: 

1. Interactive brokers

It proposes competitive rates, a wide range of financial instruments, and a sophisticated trading platform with advanced tools for active traders.

2. eToro 

It is the most used platform by beginner investors. It offers an easy-to-use trading platform, a comprehensive range of financial instruments, and social features for inexperienced traders to follow and copy successful traders.

3. TD Ameritrade

It is a particularly popular online broker in the United States, offering competitive fees, an advanced trading platform, and a wide range of financial instruments. TD Ameritrade is also known for its superb customer service.

4. Plus500

It is a popular online intermediary for beginner traders, offering a simple-to-use trading platform and many financial instruments, including CDFs on stocks, currencies, commodities, and indices.

5. Robinhood

It is a US-based connected mediator that offers very low trading fees and an easy-to-use trading platform for beginner traders. Robinhood is also known for its highly popular mobile app.

Trader Vs Broker

Traders and intermediaries have two separate financial industry roles. A trader can be an independent or an employee in a company who exchanges financial assets such as stocks, bonds, currencies, or commodities in financial markets intending to make a gain.

Traders use their knowledge of financial markets and analysis tools to identify opportunities to buy or sell assets at advantageous prices. They often take positions in financial assets with the expectation of profiting from price movements over time.

Furthermore, a middle person can be seen as a person between the buyers and the sellers in financial markets. They make easier trades by connecting buyers and sellers and executing their trades.

They may develop trading platforms, prepare research and analysis tools, publish educational resources, and assist customers in helping them make informed investment decisions

Trader Vs. Broker

Criteria Broker Trader
Role A broker is a person in the business of buying and selling securities for the accounts of others. They are intermediary connecting buyers and sellers. A dealer is a person in the business of buying and selling securities for its account. They are principal buying and selling securities.
Compensation Earns commissions, fees, and spreads from transactions. Earns profits from the bid-ask spread, the difference between buying and selling prices.
Ownership Does not own the assets being traded. Owns the assets they trade.
Client Focus Acts in the client’s best interest. Acts in its own interest for profit maximization.
Regulation Regulated to ensure fair and transparent trading. Regulated for compliance and risk management.

When discussing forex trading, a forex trader works for a company to exchange some currencies in the forex market to produce a benefit. Contrary to this, a forex mediator is a financial services company that helps traders by giving them access to a platform to trade currencies and facilitates their trades.

The table below shows the difference between broker and trader based on gifts for replenishment of the account, fixed spread, non-deposit accounts, SWAP commissions, and restrictions on trade.

Key Differences Between Broker and Dealer

Basis of Difference Broker Dealer
Gifts for replenishment of the account No Yes
Fixed spread No/Yes Yes
Non-deposit accounts No Yes
SWAP commissions Yes No/Yes
There are no restrictions on trade Yes No/Yes

SWAP refers to an exchange of one financial instrument for another between the parties concerned.

Conclusion

To conclude, being a broker is a demanding profession that presents unique challenges and opportunities. They have a crucial role in the financial services industry by advising investors and managing their wealth.

Their duties and responsibilities include:

  • Market research
  • Analyzing financial data 
  • Negotiating with clients and counterparties 
  • Managing portfolios 
  • Executing trades
  • Maintaining transaction records

Depending on the context, they should be conscious of the existing risks and possible conflicts of interest. The mediator profession offers considerable advantages, including high earning potential, career opportunities, and continuous learning. 

Besides, it also has significant drawbacks (stress, pressure, long hours, financial risks, and potential conflicts of interest).

Individuals interested in the intermediary profession must be willing to work hard, stay current on market trends, and continually learn to succeed. 

They must also be sensible of the risks and challenges inherent in this profession and be willing to work ethically to protect their clients' interests because it's very important.

We discern that it is clear that the brokerage profession is continuously evolving due to new financial services, technologies, and fluctuations in the markets.

Note

Agents should be ready to adjust to these changes to remain competitive and offer quality services to the users.

We can state that the mediator profession offers interesting career opportunities and stimulating challenges. They have a distinctive role in the financial industry by helping clients. 

However, it is fundamental for agents to remember that their primary responsibility is to act for their client's interests by reacting honestly and transparently.

Free Resources

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