Brokerage Account Basics – What is a broker and what do I need to know about brokers?

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A broker is an individual or firm that charges a fee (known in the industry as a commission) and is responsible for fulfilling the buying and selling orders placed by investors. They are also able to help out their clients with:

  • Market Research
  • Investment Suggestions
  • Other Financial Services Products. 

In the recent technology boom age, online brokerage firms have allowed individuals in the general population to access the stock market through discount brokers and trade with lower costs. However, many of the previous institutionalized, built-in advising roles that brokers previously played may be diminished.

 

Why do I need a broker?

Technically, you do not. However, if you wish to become a broker yourself, you need to obtain certain certifications and fulfill a plethora of statutory requirements. Using a broker helps with the following points:

  • Protects the buyer by ensuring the company involved in the trade is legitimate and reports their financials accurately to reflect their prices (applies to the stock market)
  • Ensures that whoever is buying or selling an instrument is a legitimate person or institution and not a terrorist, illegal organization, or money launderer
  • Makes sure that every trade is at least looked at by one person who is licensed and knowledgeable on the legal and financial effects that the trade will create