A stockbroker acts as a middleman between people who want to sell stock, such as companies, and investors who want to buy stocks. The stockbroker matches up buyers and sellers and processes all of the paperwork that allows the trade to occur smoothly. Stockbrokers also conduct research and may specialize in particular types of stocks, or in advising clients in certain areas of investment.
Stockbrokers advise investors on what investments would be most appropriate, based on their financial needs. For example, some clients may want stocks that can return a high profit at a high risk, while others may want to invest for the long term. Once the client agrees to an investment, the broker sends the order to the securities exchange, where the stock is purchased. The broker earns a commission on each trade. When a broker simply processes a trade at the request of a customer, this is called "execution-only". When a broker suggests stocks to a customer, who then chooses what to buy, this is called "advisory" trading. When a broker makes their own decision on what stocks to buy and sell, based on the general wishes of a customer, this is termed "discretionary" trading.
One of the most important parts of a stockbrokers' job, especially in the beginning of her career, is to find clients. Without clients, the stockbroker cannot make any trades. Beginning stockbrokers may call potential clients on the phone and try to convince them to invest. Stockbrokers may also solicit work from people they know. For more experienced brokers, new clients may come from referrals from satisfied clients. While beginning brokers may work with individuals, as they gain experience, they may act as brokers for businesses -- such as managing investment portfolios for banks and pension funds.
Stockbrokers, especially advisory and discretionary brokers, must continually conduct research, in order to determine how certain stocks are likely to perform in the future, and which stocks offer the best opportunity for growth. They may perform different types of economic and data analysis, research a company's history and products, research the overall market for a company's products and buy reports from specialist research firms.
Discretionary brokers are often responsible for managing large portfolios of investments. They need to prepare an Investment Management Agreement -- a legal document that details the type of stocks the client expects them to buy and sell, and the type of returns they expect to receive, such as steady, long term growth. The stockbroker has a legal duty to abide by the terms of this agreement. Stockbrokers also have a legal duty to obtain the best price they can when buying and selling. Experienced stockbrokers may also act as underwriters when new stocks are released to the public. For example, the broker may agree to sell a certain number of new stocks from a particular company at a certain price. If buyers cannot be found at that price, the broker will have to buy whatever stocks remain. Some senior brokers may become supervisors or partners in their firm, and assume a managerial or executive role.
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