STOCK BROKER

A stock broker or stockbroker is a regulated professional who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors. While the term stockbroker is still in use, it is more commonly referred to as simply "broker", "registered rep" or simply "rep"-- shortened versions of the official FINRA (pronounced "FIN-ra") designation "Registered Representative". This designation is obtained by an individual passing the FINRA General Securities Representative Examination (also known as the "Series 7 exam") and being employed ("associated with") a registered Broker-dealer also called a brokerage firm; the firm is typically a FINRA "member" firm.

More restrictive FINRA licenses or series exams exist for brokers or reps who do not need the full array of capabilities with the Series 7. See the FINRA List of Securities Examinations. And variable products such as a variable annuity contract or variable universal life insurance policy typically require the broker to also have one or another state insurance department licenses. A transaction on a stock exchange must be made between two members of the exchange — an ordinary person may not walk into the New York Stock Exchange (for example), and ask to trade stock. Such an exchange must be done through a broker.There are three types of stockbroking service. Execution-only, which means that the broker will only carry out the client's instructions to buy or sell. Advisory dealing, where the broker advises the client on which shares to buy and sell, but leaves the final decision to the investor.

Discretionary dealing, where the stockbroker ascertains the client's investment objectives and then makes all dealing decisions on the client's behalf. With the advent of automated stockbroking/trading systems on the Internet, the investor often has no personal contact with his/her brokerage firm. The stockbroker's system performs all the stockbroking functions: it obtains the best price from the market, executes and settles the trade.

Today, most of the once well-known corporate brand names including mid-sized firms such as Smith Barney (which was acquired by banking giant Citigroup) have been swallowed up by global financial conglomerates. Only a few firms remain independent, such as Edward Jones Investments, Stifel Nicolaus, Oppenheimer & Co, JP Turner & Company and Raymond James. Discount brokers (such as E*TRADE, Scottrade, TD Ameritrade, and Charles Schwab) have taken a large share of the business by offering highly discounted commissions and online/self serve accounts. Discount brokers may offer limited advisory services, but their primary focus tends to be servicing self directed retail accounts.Despite many retail investors going online with self-serve choices, brokers still handle a lot of individual and institutional investor trading. Institutional clients are typically investment advisers (and their mutual fund units and private accounts), insurance companies, pension plans, endowment funds, and high net worth individuals.