What Is an Investment Broker?
An investment broker is a person or an institution that handles the investment transactions of a client. A broker can also give personalized advice for your investment and retirement planning.
A broker is a firm that acts as the transaction agent and gives only the basic service of selling and buying investments.
In addition, an investment broker acts as an intermediary between investors and marketplaces where stocks are bought and sold.
Types of Investment Brokers
There are three types of investment brokers: full-service, online, and robo-advisors.
Full-Service Broker
A full-service brokerage firm provides a wide range of services, including investment advice, retirement planning, and tax help.
Full-service brokers typically have higher fees and commissions than discount brokers.
Online Broker
An online broker is a brokerage firm that allows you to trade stocks and other investments online.
Online brokers typically have lower fees and commissions than full-service brokers.
Robo-Advisors
Robo-advisors are investment firms that provide automated, goal-oriented investing services with little to no human interaction.
Robo-advisors typically have lower fees than full-service and online brokers.
How Much Do Brokers Cost?
The cost of using a broker varies depending on the type of broker you use.
Full-service brokers typically have higher fees and commissions than discount brokers.
Thus, online brokers and robo-advisors usually have lower fees and commissions than full-service brokers.
However, robo-advisors have much lower fees than online brokers.
Requirements for Investment Brokers
Specific requirements must be met to become an investment broker.
Job Duties
An investment broker’s job duties vary depending on the type of broker they are.
Full-service brokers typically provide investment advice and retirement planning services.
Online brokers normally only execute trades.
Robo-advisors typically provide automated, goal-oriented investing services with little human interaction.
Thus, one of the primary job duties of an investment broker is to approach clients to persuade them to use the brokerage firm as a method of buying investments.
Education
An investment broker typically needs a bachelor’s degree. Hence, according to the Bureau of Labor Statistics, it is vital to take courses in finance, economics, business, and accounting to prepare for an entry-level investment broker position.
Full-service brokers typically need a license to provide investment advice.
Online brokers typically only need to be registered with the Financial Industry Regulatory Authority (FINRA).
Robo-advisors typically do not need a license but may need to be registered with FINRA.
Licensing
An investment broker typically needs a license to provide investment advice.
To work as an investment broker, being registered as a firm representative to FINRA is a must.
Upon registration, it has a series of exams that you must complete successfully to receive licensing.
Online brokers typically only need to be registered with the Financial Industry Regulatory Authority (FINRA). Robo-advisors usually do not need a license but may need to be registered with FINRA.
Skills and Traits
An investment broker is frequently responsible for soliciting clients, so communication, customer service, and sales skills are essential.
An investment broker must have strong sales skills to convince potential clients to use their brokerage firm. They also need good customer service skills to keep existing clients happy.
Investment brokers also need to be detail-oriented and organized to keep track of their client's portfolios.
Having clients feel comfortable enough to trust you with their investments is a huge part of the job of investment brokers.
Thus, investment brokers need to work well under pressure and meet deadlines.
Pros and Cons of Using a Brokerage Firm
There are pros and cons to using a brokerage firm.
Pros of Using a Broker
These are the advantages of using a broker:
Accessibility
With the advantage of the internet, signing up for an account brokerage can be done quickly, and as your account is funded as much as possible, you can directly begin trading stocks.
It implies that a broker is one of the easiest ways to begin an investment journey.
Simplicity
There is usually not much paperwork and requirements when opening an account with a broker.
Goal-Oriented
A good broker will offer services to help you reach your investment goals.
For instance, if you’re aiming to save for retirement, the broker can provide services and tools to help you with retirement planning.
Cons of Using a Broker
These are the disadvantages of using a broker:
Fees and Commissions
Depending on the broker you choose, there could be fees and commissions that will cut into your profits.
Required Portfolio Minimums
Some brokers require a high minimum investment, which can be difficult for beginner investors.
Lack of Customer Service
When you’re working with a discount broker, you might not have access to the same level of customer service that you would with a full-service broker.
How to Choose an Investment Broker
When choosing an investment broker, consider the services you need, the fees and commissions you are willing to pay, and the level of human interaction you want.
A full-service broker may be a good choice if you need investment advice and retirement planning services.
On the other hand, an online broker may be a better choice if you only need someone to execute trades, and a robo-advisor may be the best choice for you if you want little to no human interaction and automated investing services.
Bottom Line
An investment broker is a professional or an institution that helps clients buy and sell investments.
Investment brokers can provide full-service, online, or robo-advisory services.
The cost of using an investment broker varies depending on the service you need.
To work as an investment broker, you typically need a bachelor’s degree and to be registered with FINRA.
FAQs
1. What is an investment broker?
An investment broker is a professional or an institution that helps clients buy and sell investments. Investment brokers can provide full-service, online, or robo-advisory services.
2. How much do investment brokers cost?
The cost of using an investment broker varies depending on the type of service you need. Full-service brokers typically charge higher fees than online brokers. Robo-advisors usually have lower fees than both full-service and online brokers.
3. How do I use my brokerage account?
You can use your brokerage account to trade stocks, long-term savings, retirement savings, and other saving goals.
4. Who should I choose as my investment broker?
When choosing an investment broker, consider the type of services you need, the fees and commissions you are willing to pay, and the level of human interaction you want.
5. What are the requirements for investment brokers?
The requirements for investment brokers include job duties, education, licensing, skills, and traits.
