Broker is a person or a firm that implements an investor’s buy and sell orders for a fee. In order to do that, a brokerage account is needed. A brokerage account is a deal between a broker or a brokerage firm and an investor in which the former is authorized to make transactions on latter’s behalf. It is important to note that there are many types of brokerage accounts including various services. Some brokerage firms offer only the most rudimentary services, a secure platform from which the investors may conduct their own transactions at their own discretion, while some other brokerages offer additional services alongside their accounts, such as expert advice from experienced professionals, faster implementation of orders, additional tools for analysis or more trading margin. These additional services come with additional costs, however, so it might behoove an investor to assess his/her options before choosing the type of account that suits their own financial interests in the most productive way.
Of course, the right brokerage account is not the only paramount thing to consider; choosing the right broker is just as important. Not too long ago, only the affluent could afford the services of a professional broker, so there were relatively few of them. However, the Internet has opened a plethora of new opportunities and budding new markets, so the need for brokers has been on the constant rise ever since, along with their numbers. This came at a cost, though, as this new economic boom attracted some unscrupulous and/or unqualified people to the ranks of brokers.
Brokers are usually divided into two groups: some deal with their clients directly, while others merely act as intermediaries between clients and other brokerages; these are called broker-resellers. This is why hiring services of a regular broker may seem like a good idea, since the broker-resellers are rarely as reputable or qualified as their regular counterparts, so an investor should thoroughly investigate the broker before any money changes hands.
Another distinction is between discount and full-service brokers. Discount brokers charge lesser fees, but offer little or no advice on how to invest. The appearance of discount brokers with their affordable fees is what enabled ordinary people to enter the markets formally reserved for the affluent and their assistants. However, for those favoring the traditional approach, a full-service broker is the way to go. For a (much) higher price, the client can count on expert advice on investment, taxes, financial matters as well as additional research and other tools not commonly available. In order to level the playing field, many discount brokers have introduced additional options with their standard services.
Choosing a broker is by no means a trivial task. There are many factors to consider, but in the end it all comes to an individual investor’s needs. An ideal broker should be reliable and competent, with a reasonable fee and appropriate range of services. Other than that, it is all a matter of choice.