Brokers are used to buy or sell shares on your behalf through stock exchange.There are basically two types of brokers.Discount brokers who give no advise and simply place the trade for you. Then there are full service brokers who can place trades but also give advise on what shares to buy or sell. They are more expensive than discount brokers. Discount online brokers generally charge around $20 per trade.
Since the 1980s stockbroking firms have also been allowed to be market makers as long as the appropriate Chinese walls are put in place.
With the advent of automated stockbroking systems on the Internet the client often has no personal contact with his/her stockbroking firm. The stockbroker's system performs all the stockbroking functions: it obtains the best price from the market and executes and settles the trade.
Today, most of the once well-known corporate brand names including mid-sized firms such as Smith Barney have been swallowed up by global financial conglomerates. Discount brokers (such as E-Trade, Scottrade, and TD Ameritrade) have taken a large share of the business by offering highly discounted commissions, but the companies do not offer investment advice in return--all they do is execute orders.
Some people prefer to use and pay for the services of a broker because they feel more comfortable making decisions about their finances with the interactive guidance of a licensed professional.
When using a stock broker for financial guidance, one must be made aware that they do get paid on a commission, based on the stock/mutual fund they sell, and also through Class Distinction/Operating Expense Fees/Services Fees/Shareholder Fees. Thus, a conflict of interest arises concerning a stock broker who offers his/her service as a financial planner, because their revenue is generated as a direct result of your investment in the stock/mutual fund that they broker to you. Thus your return on investment may not be as great, and the advice they give you might not be in your best interest. However, some mutual funds and stocks can only be purchased through a broker: in such cases their services are required to purchase the financial instrument in question.
In the US: When acting as an agent, the stockbroker typically charges the client a flat fee and/or a percentage-based commission for undertaking the trade, and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client, the broker informs the client and charges the client a markup or markdown from the prevailing market price.
Looking for a good Stock Market Broker? We have listed some of the best below.