Financial Dictionary -> Investing -> Stockbroker

The stockbroker is a financial professional who acts as a middleman in transactions carried out in stock trading. The buying and selling of stocks and other related financial securities on the stock market cannot take place without the involvement of these professionals. Therefore, investors do not directly buy or sell. Every transaction must be carried out with the help of a stockbroker who acts on behalf of the investors.


The services provided by qualified and licensed individuals are categorized into three types - execution only, advisory dealing, and discretionary dealing. The investor decides on how he would prefer the service provided. Under execution only, the broker carries out the instructions of the client. Under advisory dealing, the broker provides advice to clients with regard to buying or selling of shares and the type of stock to carry out transactions with. Under discretionary dealing, the broker assumes responsibility for making decisions on behalf of the client as to achieve his investment goals. The stockbroker may also act as a financial and investment advisor. Financial advisors perform similar roles to those of stock brokers, and the latter may or may not act as financial advisors.

Stockbrokers as Principals

Stockbrokers who act in their own capacity, trading on the stock market, are not necessarily called brokers. They are often involved in speculative trading, and the term broker makes little sense in this case. Since these brokers do not act on behalf of a third party, the term dealer or trader is more appropriate.

Requirements for Becoming a Broker

Not every person can simply become a broker as there are certain requirements that have to be met. For most financial products, such as securities, a license is required. In the Unites States, one has to graduate from college and pass the Series 7 Exam, known as the General Securities Registered Representative Examination. For good test results, the candidate has to enroll in finance-related college courses before taking the exam. In some states, candidates are required to pass the Series 63 exam (Uniform Securities Agents State Law Examination) and the Series 65 Exam (Uniform Investment Advisor Law Exam).

Candidates can prepare for the exams by studying on their own or joining OJTs, which are offered by brokerage firms. When the candidate passes these, he must register and obtain a license. A broker can work as an independent representative or join a company. Because this field is quite competitive, the candidate has to be passionate and proactive as to attract clients or get hired by any brokerage firm.

In the United Kingdom, candidates sit for Unit 10 Principles of Financial Regulation for MiFID or Unit 1: FBI Financial regulations, together with Unit 3: Derivatives, Unit 4: for both Securities and Derivatives, or Unit 2: Securities.

Shopping for Brokers

Investing money in stocks requires involving experienced brokers in the process. When it comes to choosing a brokerage firm to handle your stock trading investments, it is best to interview as many brokers as possible before you come up with a good list, then choosing a seasoned broker. Pay special attention to the broker's fees, how much interest they charge, and how well they are performing on the stock market. Compare different brokerage firms and independent brokers before investing. A good stock trading education also helps in the process.