What is exactly a Stockbroker?
A stockbroker is a professional trader who buys and sells shares on behalf of clients. The stockbroker may also be known as a registered representative or an investment advisor.
Most stockbrokers work for a brokerage firm and handle transactions for a number of individual and institutional customers. Stockbrokers are often paid on a commission basis although compensation methods vary by employer.
Brokerage firms and broker-dealers are also sometimes referred to as stockbrokers. This includes both full-service brokers and discount brokers, who execute trades but do not offer individualized investing advice.
Most online brokers are discount brokers, at least at their basic levels of service, in which trades are executed for free or for a small set-price commission. Many online brokers now offer premium-level services with higher fees.
You can only invest in the stock market through an investment broker. You have 131 PSE-accredited stockbrokers in the country. Some have ties with banks (ex: First Metro Securities with Metrobank, BPI Trade with the Bank of the Philippine Islands, and BDO Nomura with Banco de Oro) while others are independent brokers. How do you choose an investment broker? Many of them offer free seminars where you can learn all about their services and their website (if they provide online services). Choose a broker that you feel comfortable with.
More importantly: Choose an accredited broker that’s listed on the PSE website.
Understanding the Role of a Stockbroker
Buying or selling stocks requires access to one of the major exchanges such as the New York Stock Exchange (NYSE) or the NASDAQ. To trade on these exchanges you must be a member of the exchange or belong to a member firm. Member firms and many of the individuals who work for them are licensed as brokers or broker-dealers by the Financial Industry Regulatory Authority (FINRA).
While it is possible for an individual investor to buy stock shares directly from the company that issues them, it is much simpler to work with a stockbroker.
Until recent years, it was prohibitively expensive to get access to the stock markets. It was cost-effective only for high net-worth investors or for large institutional investors, such as the managers of pension funds. They used full-service brokers and could pay hundreds of dollars for executing a trade.
However, the rise of the internet and related advances in technology paved the way for discount brokers to provide online services with cheap, fast, and automated access to the markets. More recently, apps like Robinhood and SoFi have catered to micro-investors, allowing even fractional share purchases. Most accounts in the markets today are managed by the account owners and held by discount brokers.
Brokers who are employed by discount broker firms may work as over-the-phone agents available to answer brief questions, or as branch officers in a physical location. They also may consult with clients subscribing to premium tiers of the online broker.
