What is a Broker? A Quick Introduction

A broker is an individual or firm that acts as an intermediary, bringing together buyers and sellers to facilitate a transaction. This service is typically provided in exchange for a fee or commission. Brokers operate in various industries, including:

  • Real Estate: Real estate brokers assist in buying, selling, or renting properties.
  • Finance/Investment: Stockbrokers buy and sell securities (stocks, bonds, etc.) on behalf of their clients. Insurance brokers help individuals and businesses find suitable insurance coverage.
  • Other: Brokers can also be found in industries like shipping, commodities, and even art.

In this guide, you'll learn:

  • Different types of brokers
  • How brokers are compensated
  • Regulations governing brokers
  • How to choose the right broker

Table of Content

Text definition of a broker as an intermediary facilitating transactions.

Key Takeaways

  • Brokers are intermediaries who facilitate transactions between buyers and sellers.
  • They operate in various industries, earning commissions or fees for their services.
  • Different types of brokers offer varying levels of service and expertise.
  • Brokers are regulated to protect investors and ensure fair practices.
  • Choosing the right broker depends on your individual needs and financial goals.

Types of Brokers

  • Discount Brokers: These brokers primarily execute trades for clients at a reduced commission but typically do not offer personalized investment advice.
  • Full-Service Brokers: These brokers provide a wide range of services, including trade execution, investment advice, research, and portfolio management.
  • Independent Brokers: These brokers are not affiliated with any specific financial institution, giving them more flexibility in the products and services they offer.

How Brokers are Compensated

Brokers typically earn income through:

  • Commissions: A percentage of the transaction value.
  • Fees: Flat fees for specific services.
  • Spreads: The difference between the buying and selling price of a security.

Regulations Governing Brokers

In the United States, brokers are regulated by organizations like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). These organizations aim to protect investors by enforcing rules and standards for brokers.

Choosing the Right Broker

Consider these factors when selecting a broker:

  • Services Offered: Determine what services you need (e.g., trading only, investment advice, retirement planning).
  • Fees and Commissions: Compare the costs associated with different brokers.
  • Reputation and Experience: Research the broker's track record and reputation.
  • Customer Service: Ensure the broker offers responsive and helpful customer support.

If seeking a licensed professional, consider our services. Our insurance advisors and client support team are here to assist you with your insurance needs.


This guide has offered a comprehensive overview of brokers and their role in various industries. For those seeking to deepen their understanding, we recommend exploring our guide on financial advisors, which dives into the nuances of investment advice and its implications in greater depth.

Broker FAQ

What is the difference between a broker and a financial advisor?

While both work in the financial sector, brokers primarily focus on executing trades for clients. Financial advisors offer a broader range of services, including comprehensive financial planning, investment advice, and portfolio management.

What is the difference between a broker and a dealer?

A broker acts as an agent, facilitating trades between buyers and sellers. A dealer, on the other hand, buys and sells securities for their own account, often acting as a principal in transactions.

How do I know if a broker is reputable?

Research the broker's background, check their registration status with regulatory agencies like the SEC or FINRA, and read reviews from other clients. You can also ask for references and verify their credentials.

What questions should I ask a potential broker?

Inquire about their experience, services offered, fees and commissions, investment philosophy, and how they communicate with clients. It's also important to understand their approach to risk management and how they tailor strategies to individual needs.