The Role Of A Stockbroker (1)

While the roles of stockbrokers have largely changed as a result of the proliferation of the internet, much of it still revolves around providing the same services in a different way.

Of all the people involved in the process of investing in stocks, the stockbroker is one of the most important. A stockbroker is simply the person who helps you trade stocks. He or she is the one who executes buy and sell orders on your behalf.

Stockbrokers could be individuals or brokerage firms but their roles are still the same in terms of handling trade transactions for both individuals and institutions.

They make their money through the commissions they are paid and this is generally standardized by the relevant bodies (Securities and Exchange Commission (SEC), primarily).

While their roles have largely changed as a result of the proliferation of the internet, much of it still revolves around providing the same services in a different way. Not sure what exactly a stockbroker does? Here are some of their roles:

Executing Trades

In order anybody to buy and sell stocks on any stock exchange, the person must be registered as a member of the exchange or belong to a firm that is a member of the exchange. Since investors are generally not registered brokers, for trades to occur, brokers are required to execute them.

This is the most important role of a broker and it is generally a seamless process. As said, the stockbroker has SEC-approved fees that he or she charges for this service and will generally not charge more.

Even with the advent of the internet, online trading platforms simply facilitate trade through discount brokers and provide more access through automation. The fees are also lower as well. Of course, a downside to online trading platforms is that they may not provide the personalized service only a dedicated stockbroker can offer.

It is important that you have a stockbroker who is responsive and will not let you lose out on opportunities as a result of negligence.

Advisory Services

One of the roles a stockbroker plays is that of advisory. While you can run your investment portfolio by yourself and make all the investment decisions you want to make, nothing trumps having a voice of reason to guide you.

What is even better is when that voice is that of an expert. Before brokers can be certified, they will have received relevant training and even passed relevant exams to ensure they are fit for the role.

As such, your broker should ideally be in a better position to offer advice based on your investment objective. They might even have information that you do not have as well. They generally also have way more practical experience than you do.

While some brokers will charge you for this additional fiduciary relationship you are demanding, having a good broker on your side will give you an opportunity to generate more value than you would by yourself.

Keeping Transaction Records

Even though you might be good at record keeping, most people are not and this serves as a benefit that comes with having a stockbroker. Your stockbroker also has the role of keeping track of your transactions and your account.

With a broker, you don’t need to think back to the last transactions you made or if you wrote it for you. He or she has all your records intact.

In our next post, we will review the other more advanced roles a broker plays in ensuring your investment process is seamless and efficient.

Written by Lawretta Egba.