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