If you are considering investing in the stock market, you may need to turn to the expertise of a stockbroker, especially if you are new in this area and you want to minimize the risk. Here you’ll learn:
- What is a stockbroker?
- What does a stockbroker do?
- What can a stockbroker do for you and your business?
- Where can you find a stockbroker to work with you?
What Is a Stockbroker?
Stockbrokers are professional financial representatives that buy and sell orders for stocks and securities on your behalf. They are often called investment advisers, registered representatives, or just brokers. Stockbrokers most often work with brokerage firms. Generally, an individual stockbroker will work with both institutional customers and retail customers. Occasionally, some stockbrokers decide to specialize and work with one segment of the market. Usually, they are paid commissions on stock and security sales. However, these commissions are within a wide range that largely depends on where they work.
What Does a Stockbroker Do?
Being a stockbroker is a complex job. It involves a number of essential components:
- Trading securities for clients
- Researching the market for solid investments
- Providing trading advice to clients
- Giving tips on opening and closing market prices
- Explaining investment options, benefits, and drawbacks to clients
Buying and selling stocks or securities requires that brokers have access to one of the nation’s three major stock exchanges. Most people are familiar with exchanges like the NASDAQ or the New York Stock Exchange (NYSE). Only members of these stock exchanges, or employees of member firms, are allowed to trade stocks and securities on them. Often, stockbrokers who work for member firms are licensed as brokers by FINRA. You do have the option to buy stock shares right from companies that issue them. Usually, though, it is much easier and less complicated to go through a stockbroker.
In previous years, gaining access to stock exchanges was prohibitively expensive for most entrepreneurs. That meant that only high net worth investors could afford to participate directly. Generally, these investors would trade stocks and securities using stockbrokers. Often, investors would pay hundreds of dollars for each trade.
The advent of the Internet and improvements to communications technology have made discount brokers less expensive. Working with a stockbroker is also faster and easier than ever before since much of the process is now automated. Investors can now trade stocks and securities for much lower transaction fees. This openness has made stock exchanges prime territory for even lower net worth investors. The majority of accounts on the market are now held by discount brokers.
Some stockbrokers employed by discount firms serve as customer service agents or branch agents at physical sites. Often, the role of these brokers is to answer client questions. Far fewer brokers work for specialized brokerage firms and investment banks since these companies deal with large exchanges. Generally, they focus on bigger, specialized trades involving large blocks of stock or shares that are not actively traded.
Discount brokers make the stock market accessible to almost everyone, regardless of budget. This is true even when investors are outside the country. Broker services increasingly include roboadvisors, too. This makes the investment process even more streamlined. Roboadvisors uses algorithms to manage investments over the Internet. Sometimes roboadvisors are built into mobile phone apps. Roboadvisors enable investment with little or no human interaction. This also cuts down on transaction fees. With the lack of a human element, however, comes a corresponding decline in personal service. Roboadvisors cannot provide the level of in-depth client care as dedicated stockbrokers can.
What Can a Stockbroker Do for You and Your Business?
When not trading, most stockbrokers spend their time marketing themselves to potential clients. This involves a large degree of research. Often, dedicated stockbrokers are at their offices even before markets open to prepare their work adequately. This gives them a roadmap for their clients’ investments. Stockbrokers often contact clients in the first part of the day to give portfolio recommendations. Afternoons are often spent meeting new clients, cold calling, and networking with other brokers. Many dedicated stockbrokers even work with clients at night or over the weekends.
With their dedicated research on the market and their education in investment, stockbrokers are equipped to help businesses prosper. They want returns for their clients to keep them coming back for more business. This incentive, based most often on commissions from transactions, pushes stockbrokers to excel. These qualities are what make stockbrokers such valuable assets.
The average business owner does not have the time, experience, or education to study the market at such depths. Additionally, without memberships in exchanges, you cannot trade in the first place. Stockbrokers can help your business grow by helping you make smart investments. They also work to diversify your company’s portfolio. Diversification adds to your chances of success. If you only have one large investment and it does not work out, you could lose everything. Stockbrokers work to diversify company portfolios to increase the odds that investments will work out in favor of business owners.
Disersify your investments in the stock market to minimize the risk. Don’t put all your eggs in one basket!
Where Can You Find a Stockbroker to Work with You?
Finding the right stockbroker can be a process, but it is important to be thorough. Spending time with a potential stockbroker is essential in figuring out whether they are knowledgeable and trustworthy. This means you will need to meet with them more than once. Some stockbrokers can be too pushy, attempting to rush prospective clients into investments. When looking for a broker, make it clear from the beginning that you are considering multiple brokerages. There is no need to make any decisions on the spot since you can always call back or meet again.
Ask any questions that come to mind, even if they seem basic. A good stockbroker will be happy to answer all your questions to make sure you understand everything. How a stockbroker answers your questions will tell you a lot about them. If they rush you before you even sign on with them, how attentive will they be once they have your money? A good sign is when a stockbroker opens the conversation by asking you what you want to know, rather than telling you what they want you to hear.
Make sure to ask how much brokers charge for transactions. This might seem awkward, but this is business. You have a right to know how much you will be charged for investing. People often forget to consider how much they pay in brokerage fees for products and services. Unfortunately, some brokers are not upfront about this. This is a cautionary sign that should give you pause. Good brokers are always honest with their clients.
Don’t hesitate to ask your potential stockbroker any question. Especially about their fees!
Most stockbrokers receive a fixed percentage of your total account. In other words, their commission grows as your account does. Sometimes, they also get extra compensation for referring you to specific investments or funds their firm offers. However, your priority is finding the right investment for you. That means you want a broker who picks the best investment, not the one they are supposed to sell you.
To find a stockbroker, you can search online for local firms or ask other business owners in your area. Be careful about references from friends and family. While they may be investing, that does not mean their broker is the right one for your business. When you meet with brokers, take your time to get to know them. Never sign on at your first meeting. Remember, you can always come back. As tempting as any investment might seem, there will always be another. The best investments are made with caution and deliberation, not in a rush.
To find a good stockborker, do search online for brokerage firms in your area. You can also ask other business owners like you who are investing in the stock market and obtaining good results.
The Bottom Line
Finding the right stockbroker for your business is key to making solid, smart investments. Stockbrokers are important professionals in the life of any growing business. Without stockbrokers, entrepreneurs can be left with fewer options for growth. However, investing in the stock market can be a risky enterprise. These risks lead many entrepreneurs to wonder if it is a good idea to invest in the stock market. There are safer ways for business owners to invest if they decide that the stock market does not fit their preferences.
At Camino Financial, we offer a number of services for small businesses to help grow them to their fullest potential. Our financing is a safe way to invest in your business’s growth. Our fixed interest rates and fixed monthly payments eliminate any unpleasant surprises, so you always know what to expect. We also offer our team of business loan specialists at no extra cost. Our specialists will study your business to ensure you get a solid return on your investment and grow your business. Our business loan calculator provides an easy way to know what to expect when financing with us. Apply today to start investing in your company’s success!