# Understanding Brokers: Types, Roles, Regulations & Examples

> **Definition**
>
> A broker is an individual or firm that acts as an intermediary between investors and securities exchanges, facilitating buying and selling on behalf of clients.

[Best Online Brokers and Trading Platforms for October 2025](https://www.investopedia.com/best-online-brokers-4587872)

## What Is a Broker?

A broker is an individual or firm that acts as an intermediary between an investor and a securities exchange, charging fees or commissions for their services. There are two types of brokers: full-service brokers, which offer a variety of services, and discount brokers, which provide more limited services at lower costs. Both types of brokers are available online, making broker services more accessible to ordinary investors.

Securities brokers must be registered with the Financial Industry Regulatory Authority, and real estate brokers must be registered with state agencies; they both must adhere to certain standards.

### Key Takeaways

*   Brokers serve as intermediaries between investors and securities exchanges, playing vital roles in executing buy and sell orders, and may provide additional services like investment advice and research.  
*   There are two main types of brokers: discount brokers, who focus on executing trades with minimal fees, and full-service brokers, who offer tailored investment advice and a broader range of services in exchange for higher commissions.  
    
*   Securities brokers are regulated by FINRA and must adhere to the suitability rule and "know your client" standards, while real estate brokers are licensed at the state level, highlighting different regulatory requirements across industries.  
    
*   The rise of online brokerages has democratized access to the stock market, allowing more individuals to invest at lower costs without the need for personalized advice, which was once reserved for the wealthy.  
    
*   Real estate brokers, unlike stockbrokers, often represent sellers and manage various aspects of property transactions, distinguished by their higher level of licensing and ability to supervise real estate agents.

![Broker](https://www.investopedia.com/thmb/J7jzKFwVJ-lfZN_iGkZX4y1LmUA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/broker.aspfinal-33e95da8ded44831a5703fdd6723f129.jpg)

*— Investopedia / Candra Huff*

## How Brokers Facilitate Your Investments

Financial brokers provide securities trading services and are compensated in various ways, either through commissions, fees, or through being paid by the exchange itself. Investopedia regularly reviews all the top brokers and maintains a list of the [best online brokers and trading platforms](https://www.investopedia.com/best-online-brokers-4587872) to help investors decide what broker is best for them.

As well as executing client orders, brokers may provide investors with research, investment plans, and market intelligence. They may also [cross-sell](https://www.investopedia.com/terms/c/cross-sell.asp) other financial products and services that their brokerage firm offers, such as access to a private client offering that provides tailored solutions to [high-net-worth](https://www.investopedia.com/terms/h/hnwi.asp) clients.

In the past, only the wealthy could afford a broker and access the [stock market](https://www.investopedia.com/terms/s/stockmarket.asp). However, online brokering triggered an explosion of [discount brokers](https://www.investopedia.com/terms/d/discountbroker.asp), which allow investors to trade at a lower cost, but without personalized advice.

## Comparing Discount and Full-Service Brokers

Discount brokers can execute many types of trades on behalf of a client, for which they charge little or no [commission](https://www.investopedia.com/terms/c/commission.asp) for trades. Their low fee structure is based on volume and lower costs. They don’t offer [investment advice](https://www.investopedia.com/terms/i/investment-advice.asp) and brokers usually receive a salary rather than a commission. Most discount brokers offer an [online trading platform](https://www.investopedia.com/interactive-brokers-vs-td-ameritrade-4587950) that attracts a growing number of self-directed investors. Such services usually charge $0 in commissions.

[Full-service brokers](https://www.investopedia.com/terms/f/fullservicebroker.asp) offer a variety of services, including market research, investment advice, and [retirement planning](https://www.investopedia.com/terms/r/retirement-planning.asp), on top of a full range of investment products. For that, investors can expect to pay higher commissions for their trades.

> **Tip**
>
> Brokers receive compensation from their brokerage firm based on their trading volume as well as for the sale of investment products. An increasing number of brokers offer fee-based investment products, such as managed investment accounts. In that case, a financial planner's compensation includes a percentage of a client's assets under management (AUM), rather than from a commission.

## Understanding Roles of Real Estate Brokers

In the [real estate](https://www.investopedia.com/terms/r/realestate.asp) industry, a broker is a licensed real estate professional who typically represents the seller of a property. A broker's duties when working for a seller may include:

*   Determining the market values of properties
*   Listing and advertising the property for sale
*   Showing the property to prospective buyers
*   Advising clients about offers, [provisions](https://www.investopedia.com/terms/p/provision.asp), and related matters
*   Submitting all offers to the seller for consideration

It is not uncommon to have a [real estate broker](https://www.investopedia.com/updates/real-estate-broker/) work for a buyer also, in which case, the broker is responsible for:

*   Locating all properties in the buyer's desired area, sorted by price range and criteria
*   Preparing an initial offer and purchase agreement for a buyer who decides to make an offer for a property
*   Negotiating with the seller on behalf of the buyer
*   Managing inspections on the property and negotiating repairs
*   Assisting the buyer through to closing and taking possession of the property

## How Brokers Are Regulated in Financial Markets

Securities brokers register with the [Financial Industry Regulatory Authority (FINRA)](https://www.investopedia.com/terms/f/finra.asp), the self-regulatory body for broker-dealers. Brokers must follow the "[suitability rule](https://www.investopedia.com/terms/s/suitable.asp)," ensuring they have reasonable grounds for recommending specific investments to clients.

The "[know your client](https://www.investopedia.com/terms/k/knowyourclient.asp)" (KYC) rule requires brokers to identify their clients and understand their financial goals to justify their investment advice.

This conduct standard is different from the rules for financial advisors regulated by the SEC as registered investment advisors (RIAs). Under the [Investment Advisers Act of 1940](https://www.investopedia.com/terms/i/investadvact.asp), RIAs are held to a strict fiduciary standard to always act in the best interest of the client, while providing full disclosure of their fees.

Real estate brokers in the U.S. are licensed by the states, not by the federal government. Each state has its own laws defining the types of relationships that can exist between clients and brokers, and the duties of brokers to clients and members of the public.

> **Important**
>
> A securities broker must make a reasonable effort to obtain information on the customer's financial status, tax status, investment objectives, and other information when making a recommendation.

## Practical Examples of Brokers In Action

Full-service brokers tend to use their role at a brokerage as an ancillary service available to high-net-worth clients, along with many other services such as retirement planning or [asset management](https://www.investopedia.com/terms/a/assetmanagement.asp). Examples of a full-service broker might include offerings from a company such as Morgan Stanley, Goldman Sachs, or [Bank of America Merrill Lynch](https://www.investopedia.com/merrill-edge-review-4587910).

Larger brokerage firms often keep an inventory of shares ready for their customers. They do this to help reduce costs from exchange fees, but also because it allows them to offer rapid access to popularly held stocks. Other full-service broker firms are actually [agency brokers](https://www.investopedia.com/terms/a/agencybroker.asp). This means that unlike many larger brokers, they carry no inventory of shares, but act as agents for their clients to get the best trade executions.

An example of this would be if a high-net-worth investor named Amy wanted to place a large buy order for Tesla Inc. ([TSLA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA)) stock. Amy would call or message her broker, telling them to execute the buy order of, say, 10,000 shares. This is an order of more than $1 million, so Amy feels more comfortable having a broker execute the trade directly.

The broker receives the order and if the brokerage has those shares available, they will most likely fill Amy's order immediately. If it doesn't, it could buy those shares on the exchanges or from other brokerages. The brokerage may not place the order in the amount of 10,000, instead grabbing 500 to 1,000 shares at a time to deliver to Amy after the funds settle.

## What Exactly Does a Broker Do?

A broker facilitates trades between individuals/companies and the exchanges where the broker is licensed. Depending on the nature of the trade and marketplace, a broker can either be a human being who is processing the trade themselves or a computer program that is only monitored by a human. Typically, stock trades are computerized, whereas something like real estate requires a more personal touch.

## Do Brokers Make Money?

Yes, brokers are often well-paid. The salary a broker receives depends on a lot of factors, mainly the worth of the clients they are servicing or if they are brokers for businesses such as commercial real estate owners and sellers. A typical stockbroker may make a salary and a commission on trades managed, and had an average salary of $161,399 as of late July 2024.

## What Is a Broker and Why Do I Need One?

A broker is an intermediary between those who want to invest and make trades and the exchange at which those trades are processed. You need a broker because stock exchanges require that those who execute trades on the exchange be licensed. Another reason is that a broker ensures a smooth trading experience between an investor and an exchange and, as is the case with discount brokers, usually won't charge a commission for normal trades.

## How Do You Become a Broker?

Becoming a broker depends on a few things. First, having a background or degree in finance or economics will be extremely helpful. This may get you noticed, but to actually be hired and perform as a broker, you will need to be [appropriately licensed](https://www.investopedia.com/articles/financialcareers/07/securities_licenses.asp).

## How Do a Real Estate Agent and Broker Differ?

Real estate brokers are licensed to do everything a real estate agent does, including negotiating and writing property transactions, but brokers can also help agents with any issues that arise during the home-buying or selling transaction. Brokers have a higher level of licensing, which requires more classwork hours and tougher exams, so they can supervise and guide agents and oversee transactions. When shopping for a home, you’re more likely to work with an agent, as most brokers spend their days supervising the real estate brokerage and its agents.

## The Bottom Line

Brokers are intermediaries between the stock market and investors, executing orders and offering other financial services. Real estate brokers are licensed professionals who assist buyers and sellers in navigating the complex real estate market. Both must be registered with the appropriate state authority (for real estate) or FINRA (for securities).

Discount brokers offer lower-fee, limited services to investors, while full-service brokers charge more because they provide comprehensive financial advice, market analyses, investment advice, and other services.

Without brokers, many would-be investors would not be able to access the markets because there are federal and state requirements that must be met to gain access. Brokers do much more than provide access; however, they also inform clients about regulatory issues or changes, offer research, provide advice, and even offer personalized services.

> **Article Sources**
>
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>     
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>     
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