Stock brokers 101: What they are & how to choose one | finder.com

Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Stock brokers 101

Find out why you might need a broker and how to find the right one for your investment strategy.

Updated . What changed?

Fact checked

What does a stock broker do?

A stock broker is someone who is licensed to buy and sell investments on behalf of an investor. Since individual investors can’t directly access the stock market, a broker helps facilitate the process by executing trades on behalf of their clients.

Essentially, the broker acts as a go-between for the investor and the stock market. In addition to executing trades, stock brokers also offer advice and investment guidance. Based on market conditions, they might suggest to a client which stocks to buy or sell. Stock brokers can trade a variety of securities, including stocks, bonds, mutual funds, options, forex and futures.

Stock broker vs. brokerage

Brokerages are firms or companies that are licensed to execute trades. Stock brokers are employed by those brokerages to execute trades on behalf of their clients.

What is a full-service broker?

Brokerage companies typically come in three varieties: full-service brokerages, discount brokerages and robo-advisors.

Full-service brokerages employ stock brokers to execute trades and provide advice for brokerage clients. Discount brokerages are generally online platforms that allow investors to apply for their own brokerage accounts and execute trades independently. Robo-advisors are automated investment platforms for passive investors who want their portfolio managed by an algorithm-driven electronic service.

Investors that want the guidance and expertise of a licensed trading professional may prefer to open an account at a full-service brokerage. Investors that want more control over the investment process may prefer a discount or online brokerage that allows them to place orders for their own trades.

Types of brokerages

These days, there’s a brokerage for every type of investor. And the list continues to expand.

Discount brokers/platforms

Discount brokers are best for beginner investors and DIY traders who aren’t seeking any advice. Here are some of our top picks.

Discount brokerProsConsRead full review
Robinhood
  • 0% management fee
  • Commission-free trades on stocks, ETFs and options
  • $0 minimum deposit
  • Invest fractional shares
  • Costs extra for stock research
  • Can’t trade mutual funds or buy options
Robinhood review
Chase You Invest Trade
  • Commission-free trades on stocks, ETFs and options
  • Mutual funds with no transaction fees
  • $0 minimum deposit
  • Robust digital tools like stock screeners
  • Can’t trade cryptocurrencies, futures, commodities, or forex
Chase You Invest review
WeBull
  • Commission free trades on stocks, ETFs and options
  • $0 minimum deposit
  • User-friendly stock screener and research tools
  • Traditional and Roth IRA options
  • Can’t trade bonds or mutual funds
WeBull review

Robo advisors that do it all for you

If you want to hand off investment management to an advanced algorithm, try a robo-advisor. A robo-advisor recommends a diversified portfolio based on your individual investment goals and risk tolerance. From there, an advanced algorithm manages and rebalances your portfolio. Here are some of our top picks.

AccountProsConsRead full review
SoFi Invest
  • $0 minimum deposit
  • No management fee
  • Individual stock and ETF trading option
  • Lacks research tools
SoFi invest review
Betterment
  • $0 minimum deposit
  • 0.25% management fee
  • Tax-loss harvesting services for free
  • No individual investing
Betterment review
Wealthfront
  • 0.25% management fee on all account balances
  • Tax-loss harvesting services for free
  • 529 plan option
  • $500 minimum deposit
Wealthfront review

Brokerage platforms that offer access to advisors

If you’re a high-net-worth individual seeking holistic wealth management through financial advisors, consider these full-service brokerage firms.

BrokerageProsConsRead full review
Fidelity Investments
  • Financial advisory services tiered to different wealth levels
  • Fidelity Personalized Planning & Advice: Robo advisor + one-on one calls with a financial advisor
  • Fidelity Wealth Management: Comprehensive wealth management from a personal advisor
  • Private Wealth Management: Holistic wealth management from a specialized team
  • Zero-commission stock and ETF trades
  • Minimums and fees may be high
  • Fidelity Personalized Planning and Advice: $25,000 minimum investment and a 0.50% advisory fee.
  • Fidelity Wealth Management: $250,000 minimum investment and an advisory fee of 0.50% to 1.50%
  • Fidelity Private Wealth Management: Minimum investable assets of $10 million
  • Can’t trade crypto
Fidelity Investments Review
Merrill Edge
  • Merrill Guided Investing with an Advisor: One-one-one advice and a diversified portfolio managed by an investment team
  • Commission-free stocks, ETFs and options
  • Minimums and Fees may be high: $20,000 minimum and 0.85% annual fee
  • Can’t invest in futures or forex
Merrill Edge Review

CFPs for financial planning beyond investing

If you want wide reaching financial planning advice, but you’re not high-net-worth, consider hiring a certified financial planner (CFP). A CFP can help you meet financial goals like paying off debt, planning for retirement and saving for your child’s college education. Many work on an hourly basis. And while pretty much anyone can take on the title “financial planner,” CFPs are held to a higher standard. As fiduciaries, CFPs are obligated to provide advice solely in your best interest. This means they’re not allowed to get any kickbacks for recommending one product over another.

Back to top

How do I find the right broker?

Narrow down your options by:

  • Selecting a brokerage type. Full-service brokerages are a solid option for those who prefer the in-person guidance and expertise of a stock broker. For investors prepared to execute their own orders, online brokerages and robo-advisors stand at the ready.
  • Picking your market. The market you plan to invest in impacts the brokerages available for you to choose from. Most US brokerages offer access to the NYSE and Nasdaq, but platforms that offer access to international markets, like Fidelity and Zacks Trade, are few and far between.
  • Deciding what you’d like to invest in. Do you plan to trade stocks or would you like to explore the crypto market? Brokerages vary in the assets they have available for trade, so make sure your broker offers access what you plan to invest in.
  • Checking fees. Keep an eye out for account management fees, trading commissions, transfer fees and currency conversion costs.
  • Comparing research tools. If opting for an online brokerage, review the platform’s research and analysis tools. Less experienced investors won’t need the same type of sophisticated research tools required by advanced traders.
Back to top

What are the license requirements for becoming a stock broker?

All stock brokers in the US must be licensed by the Financial Industry Regulatory Authority (FINRA) in order to practice. But before taking the mandatory tests to receive a license, you typically need to be sponsored by a broker and complete a minimum of four months employment.

Most stock brokers hold a four-year degree in accounting, math, finance, banking, economics or business. Some even acquire an MBA or Master of Science in Finance. While post-secondary education isn’t required to take a FINRA exam, education, training and experience can help you pass.

There are two tests you must take to become a licensed stock broker: the Series 7 exam and the Series 63 exam. The Series 7 exam covers investment basics and Securities and Exchange Commission (SEC) regulations.

The Series 63 exam, also called the Uniform Securities Agents State Law Examination, covers the principles of transaction law and state securities regulations. Not all states require stock brokers to take the Series 63 — residents of Colorado, the District of Columbia, Florida, Louisiana, Maryland, New Jersey and Ohio only need to pass the Series 7 exam.

Back to top

Compare online stock brokers

If you prefer to choose on online broker, compare platforms below.

Name Product Stock trade fee Asset types Option trade fee Annual fee Signup bonus
Robinhood
$0
Stocks, Options, ETFs, Gold/Commodities
$0
0%
Free stock (chosen randomly with a value anywhere between $2.50 and $200)
Sign up using the "go to site" link
Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.
Webull
$0
Stocks, Options, ETFs
$0
0%
Get two free stock valued between $2.50 and $250
Open an account
Margin financing rates start at 3.99%. No monthly subscription fees for margin.
TradeStation
$0
Stocks, Bonds, Options, Mutual funds, ETFs, Cryptocurrency
$0 + $0.50/contract
$50
Deposit qualifying assets of $5,000+
A platform built for all kinds of traders and all styles of trading
Tastyworks
$0
Stocks, Options, Cryptocurrency
Stocks & ETFs: $1/contract to open, $0 to close, $10 max/leg
Futures: $2.50/contract to open, $0 to close
0%
Get 100 shares of stock (worth $1 to $6 a share)
Open and fund a new cash or margin account with $2,000+
Trade stocks, options, ETFs and futures on mobile or desktop with this advanced platform.
Interactive Brokers
$0
Stocks, Bonds, Options
$0 + $0.65/contract, $1 minimum
0%
N/A
IBKR Lite offers $0 commissions, and IBKR Pro offers advanced tools for professional traders.
loading

Compare up to 4 providers

*Signup bonus information updated weekly.

How do stock brokers make money?

The following conditions determine how much a broker is paid:

  • Commission. This is the primary source of income for brokers. A commission is given to the broker every time you trade through them. The more you trade, the more you pay.
  • Referral bonuses. Sometimes brokers will encourage and recommend certain stocks to invest into. The brokers receive a referral bonus if you decide to invest in that said product.
  • Broker fees. Calling a broker for advice or to make a transaction will cost you.

The average salary of a broker is $71,720, but varies based on the level of experience the broker has plus the amount of commission they receive.

Bottom line

Finding the right stock broker can mean spending less and making trades that are best for your investment strategy. A brokerage can help you manage your portfolio and set practical investment goals. Review your brokerage account options with multiple providers to find the platform best suited to your investment needs.

Frequently asked questions

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site