Brokers: Roles, Types, Regulation, and Examples

A broker is an intermediary who connects buyers and sellers in a marketplace. Brokers can be individuals or firms that execute transactions, advise clients, and provide access to markets that require licensed intermediaries. Common areas with brokers include securities (stocks, bonds, options) and real estate.

Key takeaways

• Brokers execute trades or transactions and can offer additional services such as research, advice, and account management.
• Two main brokerage models exist: discount brokers (low-cost trade execution, minimal advice) and full-service brokers (comprehensive advice and services for higher fees).
• Securities brokers are regulated by industry authorities and must follow suitability and know-your-client standards; real estate brokers are licensed at the state level.
• Online discount brokerages have expanded market access for self-directed investors; full-service brokers remain common for high-net-worth and institutional clients.

What brokers do

Securities brokers:
* Execute buy and sell orders on behalf of clients.
* Provide trade execution through exchanges or internal inventories.
* May offer market research, investment recommendations, managed accounts, and access to more complex products.
* Are compensated via commissions, fees, salary, or fee-based arrangements tied to assets under management (AUM).

Real estate brokers:
* List, market, and show properties.
* Advise sellers on pricing and negotiating offers.
* Assist buyers by locating properties, preparing offers, negotiating terms, managing inspections, and guiding closings.
* Typically have higher licensing and oversight responsibilities than real estate agents and can supervise agents.

Discount vs. full-service brokers

Discount brokers:
* Focus on efficient trade execution at low cost or no commission.
* Provide online trading platforms suited to self-directed investors.
* Usually do not provide personalized investment advice.

Full-service brokers:
* Offer tailored investment advice, research, retirement and wealth planning, and a wider product set.
* Charge higher fees or commissions for advisory and concierge services.
* Often serve high-net-worth clients and institutional accounts.

How brokers facilitate investments

• Access: Exchanges and certain markets require licensed intermediaries to execute trades.
• Execution methods: Brokerages may route orders to exchanges, fill orders from internal inventories, or use agency execution to find the best available price.
• Advisory and planning: Many firms bundle execution with research, asset management, or financial-planning services.
• Compensation models: Commissions, transaction fees, salaried compensation, and fee-based AUM arrangements are common. Cross-selling of other financial products is also a typical revenue source.

Practical example: A large buy order placed by a high-net-worth investor may be filled from a broker’s inventory, purchased in tranches on the exchange, or routed to other firms to obtain the required shares while minimizing market impact.

Regulation and standards

Securities brokers:
* Register with the industry’s regulatory authority and must follow conduct standards such as suitability (recommending investments appropriate for a client) and know-your-client (KYC) rules.
* Are distinct from registered investment advisers (RIAs), who are held to a fiduciary standard requiring them to act in clients’ best interests and to fully disclose fees.

Real estate brokers:
* Are licensed and regulated by state agencies. Each state defines permitted relationships with clients and duties owed to buyers, sellers, and the public.

How to become a broker

• Education in finance, economics, or related fields helps but is not sufficient by itself.
• Licensing and registration are required: securities professionals must meet regulatory licensing requirements; real estate brokers must complete state-mandated coursework and pass state exams. Firms typically supervise and register brokers with relevant authorities.

Common questions

What does a broker charge?
* Charges vary by model: discount brokers charge low or no commissions for trades; full-service brokers charge higher fees or commissions and may charge advisory fees tied to AUM.

Do brokers make money?
* Yes. Compensation can come from commissions, fees, salary, and client asset-based fees, and may include incentives to sell certain products.

How does a real estate broker differ from an agent?
* Brokers hold more advanced licensing, can supervise agents, and take on greater legal responsibilities. Agents typically work under a broker’s supervision and handle most client-facing transactions.

Why use a broker?
* Brokers provide licensed access to exchanges, execution expertise, market insight, and—depending on the firm—research and personalized financial planning.

Conclusion

Brokers play a vital role in financial and property markets by executing transactions, providing access to regulated exchanges, and offering advisory services. Choosing between discount and full-service brokers depends on the level of advice, support, and cost an investor or client needs. Real estate brokers have distinct duties and licensing compared with securities brokers, reflecting the different regulatory frameworks in each market.