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Role of Stockbrokers

The term

broker has been used to describe financial transaction agents since the

seventeenth century. Brokers are part of a bigger category known as investment bankers, a

group that is also not new. Investment bankers have been around since at least the Middle

Ages when they were responsible for raising the monies necessary for kings and queens to

wage war on one another. The adjective "investment" describing banker only means that the

banker focuses on investment as opposed to other banker functions such as retail banking,

which deals with such things as checking and savings for the general public.

Modern standards are substantially less dramatic and violent. A stockbroker today is a

person who has passed a test called a Series 7 Exam administered by the Securities and

Exchange Commission (SEC) and, as such, has the necessary qualifications to buy and sell

stock for his or her clients. A brokerage firm is nothing more than a firm composed of, you

guessed it, stockbrokers.

What kind of people become stockbrokers? Those who obviously have some sort of interest

in finance, economics, and the stock market. This would be necessary, as the Series 7 exam

is not easy and the career of a stockbroker, because of the high pressure, is generally pretty

short (about two to three years). For those reasons, most brokerage houses will pay for new

brokers to take classes, similar to preparing for the SAT, and even pay for the new broker to

take the exam. The new broker would then, however, be committed to work for the brokerage

house for a period of time, again, usually a couple of years. Most of the people who go

through this are also attracted by the availability of high income. As brokers work on

commission, their pay is directly tied to how motivated they are to sell stock. An aggressive

broker can make hundreds of thousands, or even millions of dollars per year.

In addition to having the qualifications including licensing and knowledge of stocks and the

markets, brokers are the only ones legally permitted to buy and sell stock, so they've got a

lock on the market. Like it or not, you've got to use a broker or brokerage firm to buy stocks.

Luckily, since the abolishment of standardized broker fees in 1975, many different types and

price structures for stockbrokers now exist. Everyone has access to any number of

competing firms, so you can pick the type of broker or brokerage that is most applicable to

your needs.