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