What is a Stock Broker?

Published by Thomas Herold in Investments, Retirement, Trading

'Stock Broker' is explained in detail and with examples in the Retirement edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Stock brokers are professionals who are both licensed and registered with the Financial Industry Regulatory Authority or FINRA. In general, stockbrokers work for a broker dealer or a stock brokerage firm. Stock brokers are not to be confused with financial advisors or financial planners, who perform many different services for their clients.

Stock brokers have a primary responsibility. Their job is to purchase and sell stocks, bonds, mutual funds, and other related investments on behalf of their clients. These clients can be retail investor individuals or institutional clients. Institutions as clients refer to not for profit companies, universities and colleges, foundations, and other similar groups.


Stock brokers trade stocks for their clients over a stock exchange or sometimes an over the counter market. Among the larger and better known stock exchanges are the New York Stock Exchange and NASDAQ. They are compensated for these trades with commissions or fees that the trader pays. These fees range widely from one type of stock broker to another. Online stock brokers offer the lowest commissions to their clients. These types of brokers usually charge under $15 per trade.

There are a variety of names for stock brokers in the industry. These various titles refer to different licenses the brokers may hold, the various services they deliver to their clients, and the kinds of securities which they trade. Stockbroker is an older designation for these individuals who are now more commonly referred to as brokers, reps, registered reps, or financial advisors.

Not all of these titles refer to exactly the same type of professional. The scope of a financial advisor or financial planner is generally much broader than that of a stock broker. A stock broker would primarily handle the trades in and out of given securities. Financial advisors and planners look at the entire picture of a person’s investments and future goals to come up with a comprehensive investment and financial plan for the individual.

The requirements to become a stock broker vary. In the U.S., these professionals usually need to hold a bachelor’s degree. The brokerage firms are preferably looking for applicants who have a business degree in a subject such as finance, economics, accounting, or a related field. Those applicants who possess master’s degrees in business or finance receive preferential hiring treatment. Because they are in greater demand, they are able to command higher salaries than applicants who only hold bachelor’s degrees.

Once a stockbroker candidate is selected, they must be sponsored by the brokerage that hired them. They can only take the exams required by the stock market industry if they have the sponsorship of such a brokerage firm. There are a variety of exams that are available to stock broker candidates. American stock brokers have to take and successfully pass the Series 7 exam, as well as the Series 63 exam or the Series 66 exam. Once they have completed such exams, they can be registered with the Financial Industry Regulatory Authority. At this point, the candidate is officially a registered representative, or stockbroker.

In the past, a stock broker was a professional that only wealthy investors and individuals could afford. They were able to access stocks and other investments through these brokers. Minimum account sizes kept out smaller investors generally.

Thanks to the Internet, access to the markets broadened considerably. Discount brokerage firms and discount stock brokers proliferated. These allow for individual investors to trade stocks and other investments for low and reasonable fees with much smaller minimum account sizes. They do not offer personal advice to their clients. Thanks to these changes that technology empowered, most any individual is able to invest in the markets today.

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The term 'Stock Broker' is included in the Retirement edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.