What is an investment broker? – Forbes Advisor

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Although you can invest in the stock market yourself through online brokerage, you may be wondering if an investment broker can make your life easier.

Investment brokers can guide you through the investment process and make recommendations based on your goals. However, they tend to charge high fees, so they are not for everyone. Here’s how to determine if an investment broker is right for you.

What does an investment broker do?

An investment broker is a financial specialist who performs investment transactions for a client. These professionals can buy and sell securities such as stocks, bonds, mutual funds and other investment products on your behalf.

They can either work in the interest of their clients (called a broker), their own accounts (called a dealer) or both. There are also online brokers, which are trading platforms that usually charge less fees or no commissions compared to working with a person.

An investment broker is not the same thing as a financial advisor. A full-service investment broker can conduct market research and make investment recommendations for you, while a financial advisor will review your overall financial situation and create a holistic plan – other than just investing – to help you achieve your financial goals.

How does an investment broker make money?

Investment brokers make money by charging fees and commissions on trades they make on your behalf. These fees are called broker fees and include:

  • Mutual fund fees. These are fees that brokers earn from buying and selling mutual funds. There are three different types of mutual fund fees that apply to different classes of shares. Class A shares, for example, charge a pre-commission that will go directly to your broker. Class B shares carry a fee if you do not hold them for a certain period of time. Class C shares have no upfront fee, but have high maintenance fees.
  • Asset Management Fees (AUM).. AUM fees refer to a percentage of the total value of your portfolio that is charged as a fee. For example, a 1% AUM fee for a $ 30,000 portfolio is $ 300.
  • Fees on account. Brokers may also charge account maintenance fees, such as a monthly maintenance fee.
  • Trade spreads. The trading spread refers to the difference between the amount you pay for a security and the amount paid to the issuer. The broker will win the difference. For large stocks, spreads are usually small amounts, such as less than a dollar. Trading smaller stocks may have larger spreads.
  • Trading commissions. Every time an investment broker makes a deal, they receive a commission. Online brokers often offer stock deals without commissions.

As you can see, there are various fees that investment brokers may charge. Before you decide to work with a broker, find out how much it will cost. Do your best and add all the potential fees to make sure you get a good deal.

Do I need an investment broker?

Investment brokers can be useful for people who are new to investing, as well as for people who want to build a solid investment strategy.

Your investment goals and strategy will determine what type of investment broker you need to work with. You will want to align these goals and strategy with the broker’s fees.

For example, if you are an investor who wants to make frequent trades, working with a broker who has high trading commissions is probably not appropriate. If you have a smaller portfolio, working with a broker who has high AUM fees will also not be beneficial to your goals.

How to find an investment broker

Endless amounts of investment brokers can make it amazing to find one to work with.

To choose an online broker, look for unbiased comparisons and rankings from trusted publications. These comparisons usually include an overview of fees, minimum balance requirements and the pros and cons of using the services. If you are new to investing, consider the best online brokers for beginners.

Before working with any investment broker, whether it is an online broker or a real person, you should research their credentials, origins and any disciplinary actions they may have encountered. You can use FINRA’s BrokerCheck tool to search for an individual or brokerage firm by name and city, state or zip code.


An investment broker is a person who trades in securities on your behalf. They make money by charging customers various fees, including trade commissions, account maintenance fees, AUM fees, and mutual fund fees.

Finding an investment broker that meets your needs can be done through independent research and reading rankings from trusted financial publications.

Are you looking for a financial advisor?

Start with a financial advisor with Personal Capital to develop your financial strategy

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