Stockbroker

A stockbroker is a registered representative that operates as a regulated broker, broker-dealer, or investment manager who can provide services to individuals.

Most commonly these services include financial advisory, investment management services, or executing transactions, i.e., the purchase or sale of stocks.

Historically stockbrokers perform these services for commissions or fees, which are based on flat rates, percentage of assets, or simply hourly rates.

Since the disruption of the equities industry by fintechs, many stockbrokers no longer charge commissions on a wide range of basic services such as simple trading execution.

Stockbrokers adhere to very strict levels of regulation, namely in the United States or Canada.

This ensures the best execution and services for investors but also helps police entities from engaging in foul play or market abuse.

Can You Trust Stockbrokers?

Stockbrokers vary by country and in most instances adhere to strict oversight.

In the US, the Financial Industry Regulatory Authority (FINRA) regulates all investment professionals in the country, including stockbrokers.

Individuals must take exams such as the Series 7, Series 63, Series 66, or Series 65 exam to qualify as stockbrokers who can legally provide different types of investment services.

Different countries rely on different regulations to ensure the proper training and oversight of stockbrokers.

Despite this regulation, there are several scams that wealth managers or stockbrokers can engage in, including pump and dump scams, Ponzi schemes, and Boiler rooms, among others.

Before engaging with any stockbroker, it is advised to check its regulatory status or investigate the company or individual to ensure that it is reputable.

Often, fraudulent entities or scams will engage in speculative language or offerings that are simply too good to be true. These should actively be avoided.