A stockbroker is a regulated professional that buys and sells stocks following the instructions of a client.
- Stockbrokers help investors buy and sell stocks over an exchange. They earn a fee or commission for providing this service.
- Most transactions are now made via online discounted brokers who charge low fees and offer an automated service.
- There are three types of stockbrokers: full-service brokers, discounted brokers, and online brokers.
What is a Stockbroker?
A stockbroker is an agent of business whose primary responsibility is to buy and sell stocks on behalf of clients. Individual investors use the services of stockbrokers to not only facilitate buying and selling but also to seek advice on what to invest in. Stockbrokers are licenced professionals who have access to major stock exchanges.
Stocks are traded on exchanges such as the NASDAQ and London Stock Exchange. To trade on these exchanges requires access, through either being a member or working for a member firm (stock brokerage). Investors can buy shares directly from a company that issues them, however, it is much easier to use the services of a stockbroker.
Types of stockbroker
There are three main types of stockbrokers: full-service brokers discounted brokers and online brokers. All three are popular, although the past two decades have seen a surge in popularity for online brokers. Below, we’ve briefly explained each one.
- Full-service broker. This type of broker offers the broadest range of services to clients and is mostly used by high net worth individuals, or professional investors. Full-service brokers not only execute buying and selling on behalf of clients but provide research and recommendations. However, they charge the highest fees.
- Discounted broker. As the name suggests, discounted brokers are cheaper to use than full-service brokers, although offer fewer services. They charge heavily discounted fees and commissions but typically do not provide any advice or recommendations. Although, some do offer tools to facilitate clients conducting their own research.
- Online broker. This type of broker is the cheapest to use and can charge zero fees or commissions. Everything is conducted online through a trading platform, giving clients direct access to an exchange. Speed and access to a range of markets have seen online brokerages surge in popularity. These types of brokers are preferred by short term traders.
Where can I learn more?
For more information about stockbrokers, check out our dedicated page to the best ones around. Alternatively, to learn more about the stock market and other financial markets, click through to our stock learning hub where you can see our free online investing courses.
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