When it comes to financial planning, there are a lot of stock terms that you should be familiar with. If you’re going to make smart decisions about your money, your investments and your financial future, then the more you understand these basic investment terms, the easier it is to make the right decisions. One of the basic terms you should be familiar with is “stock broker.” No doubt you’ve heard the term before, but maybe you don’t exactly understand what a stock broker is or what they do. If that’s the case, read on for a definition of stock broker, as well as information about this important piece of your financial puzzle.
What is a Stock Broker?
A stock broker is defined as a professionally-trained person who buys and sells stock on behalf of his or her clients for a commission or other fee. These sales usually happen on the stock market through various securities exchanges. The stock broker is usually associated with specific brokerage firms, but can also be an independent agent.
What does a Stock Broker Do?
Stock brokers handle client money and execute buy and sell transactions for the clients. Some stock brokers may work on the floor of the stock exchange, such as the New York Stock Exchange. In old days, most transactions on the floor took place when the buy and sell orders were manually matched with other brokers. In the modern exchange, transactions are now mostly matched electronically, so most brokers now work at the desk in their employer’s offices.
Stock brokers also make calls to the clients and prospective clients to develop new business for their companies. This may be for new business, or it may also be to move a large amount of stock that has come on the market. Clients can be retail clients or other institutional investors such as pension funds, mutual funds or hedge funds
Stock brokers make their income from commissions on the stock transactions.
How Are Stock Brokers Trained?
To become a broker, one must typically hold at least a bachelor’s degree in finance or business administration. This ensures that the broker begins with a basic knowledge of how business and the markets work. Usually, brokers also train in highly competitive environments before the firm allows them to handle their own clients. All of this training helps to ensure that your broker has a solid understanding of what is best for you and your investments.
Are Stock Brokers Necessary?
It used to be that the answer to his question was pretty much yes. However, with the rise of various financial websites, it is possible to cut out the broker completely and buy and sell on your own. However, in doing so, you are missing out on the years of training and professional experience that the stock broker can bring to the equation in the form of knowledge and advice. For this reason, while a stock broker might not be necessary to buy and sell, a broker is necessary if you want to get the most out of your financial transactions.
If you are looking for someone to help you make decisions about your financial transactions, a stock broker can help. Trained to understand the ins and outs of the financial markets, a stock broker is there to offer stock market advice and help you get the most out of your investments.
But keep in mind that stock broking is essentially a sales position. As a result, people who succeed as a stock broker are good salespersons. If you are good at math or financial products, but not a very good sales person, you are better off working as a financial analyst for a bank. If you like work with people and guide them in their financial lives, you may instead wish to work as a financial advisor or a financial planner.