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Role of Online Brokers

Aug 17, 2007
Online Brokers are people or companies who buys and sells stocks on behalf of another person or a company. Brokers earn their living by charging a commission on the impressive achievement and sale of stocks.

Online Brokers are useful in corresponding to the stock people and sellers. A transaction on a stock exchange must be made between two members of the exchange. A common person cannot walk into the used York Stock Exchange and ask to trade stock. Hence an exchange must be done through a Broker.

In addition to them actually trading stocks for their clients, they can also offer advice to their clients on which stocks, mutual funds, and etc to buy. Some newer Online Brokers offer transaction services online expression within the form of a website interface. These typically offer low commissions, as low as one or two USD, and fast transaction rates, maybe up to two seconds too.

To better understand what Brokers are and how they operate, let's define the broker's role as:

They are a type of a salesperson.
They generally work for a stock brokerage house.
Their job is to carry out transactions accurately for you.

Advice for using Online Brokers

There are numerous populace who prefer to use and pay for the services of Brokers because they feel more comfortable making decisions about their finances with the online interactive supervision of a licensed professional.

When using the services of Online Brokers for financial guidance, one must be made aware that they do get paid on a commission basis, that is based on the splendid stock, the mutual fund they sell, and through specific Class Distinctions, Operating Expense Fees, Services Charges, Shareholder Fees.

Hence a conflict of interest arises here concerning Brokers who offers their services as a financial planner as their revenue is generated as a direct result of your investment element within the stock or a mutual fund that they broker to you.

Hence your return on investment can't be as fantastic, and the advice they give you might not be in your greatest interest. However, some mutual funds and stocks can only be purchased through Online Brokers and in such cases their services are required in getting hold of the financial instrument in question.

Here, they will not 'cold call' you that is if you or someone of your trust can obtain a call that offers you the shares at what seems an intolerably bargain then it becomes most important to understand if you are probably being contacted by a boiler room. These are usually not registered with the FSA and could be in a foreign country where fraud laws are negligent.

Who qualifies to become Online Brokers?

The glamorous life of Brokers is not made for everyone. The Brokers must pass two licensing examinations called the Series 7 and Series 63 prolifically. After completing these exams they are allowed to advise you, to solicit business from you, and to execute transactions on your behalf.

Thus, Online Brokers are employed by a brokerage house to facilitate your transactions and, trait within the case of full-service brokers, to advise you in making your investment decisions correctly.

Although Brokers can do their own research, but they are strictly not research analysts. They are not one of the leading people about whom you might read,. Research analysts are other folks who work for brokerages, and it is they who do that sort of enlightening, in-depth research of a company's business and market.

Categories of Online Brokers

Basically Brokers can be classified into four very broad categories of brokers to give an idea of what is available so that it helps the customers decide where they fall in the spectrum of services offered by the Online Brokers.

Discount/online broker
Discount broker with assistance
Full service broker
Money manager

Choosing the type totally depends on the customers needs.
About the Author
William Smith the author provides much more financial information on many subjects as well as the secret to his success in the market along with 5 Free power stock picks emailed daily so grab your Free subscription on his website at Online Brokers (All is Free)
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