| Stockbrokers are people who deal with | | | | Similar roles |
| stock & bonds. | | | | Roles similar to that of a stock broker |
| Function | | | | include investment advisor, financial |
| A stock broker sells or buys stock on | | | | advisor, and probably many others. A |
| behalf of a customer. The stock broker | | | | stockbroker may or may not be also an |
| works as an agent matching up stock | | | | investment advisor, and vice versa. |
| buyers and sellers. A transaction on a | | | | The Certified Financial Planner |
| stock exchange must be made between two | | | | designation initially offered by the |
| members of the exchange - a typical | | | | American College in Pennsylvania is |
| person may not walk into the New York | | | | considered by many to be the next |
| Stock Exchange (for example), and ask to | | | | educational step a stock broker can take |
| trade stock. Such an exchange must be | | | | in order to be considered a legitimate |
| done through a broker. | | | | and ethical financial consultant. |
| In addition to actually trading stocks | | | | Tips for using a stock broker |
| for their clients, stock brokers may | | | | Some people prefer to use and pay for |
| also offer advice to their clients on | | | | the services of a broker because they |
| which stocks, mutual funds, etc. to buy. | | | | feel more comfortable making decisions |
| Online | | | | about their finances with the |
| Some newer brokers offer transaction | | | | interactive guidance of a licensed |
| services online in the form of a website | | | | professional. |
| interface. They usually offer low | | | | When using a stock broker for financial |
| commissions, as low as one or two USD, | | | | guidance, one must be made aware that |
| and fast transaction rates, up to two | | | | they do get paid on a commission, based |
| seconds. The latest development has been | | | | on the stock/mutual fund they sell, and |
| the introduction of entirely free stock | | | | also through Class Distinction/Operating |
| trading. | | | | Expense Fees/Services Fees/Shareholder |
| History | | | | Fees. Thus, a conflict of interest |
| Philadelphia was the center of American | | | | arises concerning a stock broker who |
| finance during the first forty years of | | | | offers his/her service as a financial |
| the new United States. In 1790, the | | | | planner, because their revenue is |
| country's first stock exchange was | | | | generated as a direct result of your |
| founded there and Chestnut Street was | | | | investment in the stock/mutual fund that |
| home to the nation's most powerful | | | | they broker to you. Thus your return on |
| financial institutions. However, in the | | | | investment may not be as great, and the |
| 1820s a shift to New York City began and | | | | advice they give you might not be in |
| for more than one hundred and fifty | | | | your best interest. However, some mutual |
| years Wall Street has been synonymous | | | | funds and stocks can only be purchased |
| with the stock brokerage business. A | | | | through a broker: in such cases their |
| number of firms rose to prominence over | | | | services are required to purchase the |
| that time with the top-ranked brokerages | | | | financial instrument in question. |
| in the early 1950s being: | | | | A word of warning: If you receive a call |
| Merrill Lynch & Co. Inc. | | | | offering you shares at what seems an |
| E. F. Hutton & Co. | | | | unfeasibly good deal (e.g., an imminent |
| Bache & Co. | | | | IPO which will cause the price to 'go |
| Paine Webber & Company | | | | through the roof'), then you are |
| Francis I. DuPont & Co. | | | | probably being contacted by a boiler |
| Dean Witter Co. | | | | room. These are typically not registered |
| Goldman Sachs | | | | with the FSA and could be in a foreign |
| Bear Stearns | | | | country where fraud laws are lax. If you |
| Since the 1980s stockbroking firms have | | | | suspect that you have been contacted in |
| also been allowed to be market makers as | | | | this way, see Boiler room for more |
| long as the appropriate Chinese walls | | | | information. |
| are put in place. | | | | The pitch follows this pattern: |
| With the advent of automated | | | | Privileged information- this takes the |
| stockbroking systems on the Internet the | | | | form of a tip, insider knowledge he is |
| client often has no personal contact | | | | not allowed to divulge of a big |
| with his/her stockbroking firm. The | | | | corporation going to invest in a minnow |
| stockbroker's system performs all the | | | | or in this case a takeover by a company |
| stockbroking functions: it obtains the | | | | he is allowed to mention. |
| best price from the market and executes | | | | A good story related to a product in |
| and settles the trade. | | | | demand: oil, digital video etc. |
| Today, most of the once well-known | | | | The need to get in early at a privileged |
| corporate brand names including | | | | price. |
| mid-sized firms such as Smith Barney | | | | He will hold the block of shares giving |
| have been swallowed up by global | | | | you time to research the company. |
| financial conglomerates. Discount | | | | There is a 12 month period when you are |
| brokers (such as E-Trade, Scottrade, and | | | | not allowed to sell. |
| TD Ameritrade) have taken a large share | | | | When he phones again he assumes you are |
| of the business by offering highly | | | | going to buy, asks for your national |
| discounted commissions, but the | | | | insurance number to prove your identity |
| companies do not offer investment advice | | | | and transfers you to administrator who |
| in return--all they do is execute | | | | takes details for a stock purchase |
| orders. | | | | application. |