The term “broker” is often used to describe not just the person that may help you buy and sell securities but the actual firm itself. When viewed using that broader definition, brokers are absolutely essential for processing trades.

A financial broker is an intermediary that is authorized to sell and purchase securities and stocks on behalf of buyers and sellers. Brokers provide various investment services on behalf of their clients, usually on commission.

A brokerage is an institution that processes your securities transactions. Whether you trade with a traditional full-service firm like UBS or Merrill Lynch or use an online platform like Robinhood or E-Trade, you’re dealing with a brokerage.

In order to become stockbrokers, individuals must pass the General Securities Representative Qualification Examination, also called the Series 7 Exam. They will then be authorized to trade stock on the stock exchange.

Types of Stockbrokers Execution-only Advisory Discretionary

Traditional brokers generally offer advice to clients, and in some cases they may also handle discretionary trades. These types of brokers tend to have a one-on-one relationship with their clients.

One of the biggest differences between traditional and discount brokers are the fees. Because traditional brokers offer one-on-one services, the fees are much higher than with discount brokers, which tend to have low fees.

Traditional brokers typically provide assistance and advice for clients, but discount brokers usually do not. People who would like a personal relationship with their broker, or who could benefit from their expert input, should opt for a traditional broker.