What Is a Stock Broker?

The film Wolf of Wall Street might suggest that brokering stock trades is a glamorous profession. And while brokers certainly had their heyday, the nature of the profession has largely changed, thanks to the advent of self-serve online trading platforms, which democratized access to the stock market to anyone with an internet-enabled computer. 

Today, stock brokers are still registered financial professionals in charge of executing trades on behalf of people and businesses. But their job description has expanded to include investment advisory services.

What is a stock broker?

A stock broker is a person who buys and sells different types of securities including stocks, bonds, mutual funds and other assets for the firms they work for or on behalf of other people. They are the middle person between a stock exchange and an investor.

What are the different types of brokers?

There are different types of stock brokers to serve different types of investors, with different needs.

• Full-service brokers.

  Full-service firms offer a wide variety of services, including personalized investment advice, financial planning, and more. Each person or business gets paired with a person to handle their individual account. They tend to be more expensive than discount brokers and robo-advisors. 

• Discount brokers.

  Discount firms execute trades on an investor’s behalf but don’t give advice. Before technology enabled investors to use self-service online platforms to initiate trades, investors would call a discount broker and instruct them to place a trade on their behalf. But today, many online trading platforms essentially function as discount brokers. 

Why would an investor use a full-service broker?

An investor might use a broker for any number of reasons, which might be personal to their own needs and goals.

• Need expert advice.

  Stock brokers and broker-dealers have an intense depth of knowledge when it comes to the stock market, specific securities, and how to manage a strong portfolio. For novice investors, the help of a broker can be beneficial in guiding them to make the best financial decisions for their goals.

• Personalized management.

  Some investors might have specific requirements for their investments, but don’t have the time to devote to managing them themselves.

• High net worth.

  High net worth individuals often engage investment professionals to manage their assets.  ‍

• Special access.

  Some stock brokers also help sell IPO stock or private placements, offering their clients special access to investment opportunities not available on self-serve platforms.

What are the duties of a stock broker?

The main job of a stock broker is to buy and sell securities, usually stocks, on an exchange. But different brokers have different jobs, and some may wear various hats within their firms. 

• Find clients.

  Some business brokers are tasked with finding clients, like banks and other firms, to work with their firm. 

• Get funding.

  Others might have to research or find financing options, like investors to put money into their company. 

• Consulting.

  Some offer consulting services, giving investors advice on specific stocks or other securities based on their knowledge. 

• Support staff.

  Depending on the firm they work for, some brokers might have other support duties that don’t involve direct trades or handling transactions.

Alternatives to full-service brokers

Not everyone needs a stock broker. For some investors, there are investment alternatives to consider, like: 

• Self-serve, commission-free platforms.

  These online platforms (which essentially function as discount brokers) let investors handle their investment accounts on their own with little oversight on the company’s end. These are best for investors who want to hand-pick stocks without the help of a financial professional.

• Robo-advisors.Robo-advisors

  are software-based services that automate investing via algorithms built by economists and financial advisors. Investors who use robo-advisors fill out a questionnaire about their finances and future goals. They identify savings goals such as retirement, education, or a home and assess risk tolerance. From there, the robo-advisor automatically designs a portfolio and invests funds from the initial deposit. The entire process is handled either online with a computer or on a mobile app.

• Managed investment solutions.

  Managed investment products combine the set-it-and-forget-it aspect of robo-advisors, but task investment management to humans rather than computers. These products may be less expensive to use than a full service broker, but more expensive than a robo-advisor. 

The bottom line

Things have changed since the Wolf of Wall Street era. Most stock brokers today work on behalf of a firm to make trades and offer advice in the best interest of their clients. There are various reasons an investor would use a stock broker, especially if they have specific investment needs and can’t handle their portfolio on their own. High-net worth individuals also tend to opt for investment advice. But today’s tech-enabled investment landscape offers plenty of other options for investors who either want to go it alone or outsource the management of their capital to someone else.