Surely you’ve heard of the word “broker” so far. Maybe a close friend mentioned that he uses the broker’s services — but what exactly does he do? So far no one was able to send in the perfect solution, which is not strange.
In addition, many make the mistake of believing that a broker is the same as a salesperson. The agent is a company you want to buy from, and a broker is more than that: he is the person who buys and sells on behalf of the investor.
In the following lines, we go into more detail about what brokerage means, types of brokers and other useful information.
What does “broker” mean?
The first cases of semi-authorized transactions took place in Rome, during the time of Julius Caesar. But the term “broker” is from Old French. Of course, there are sources who believe that the term has an Anglo-Saxon origin, but “broker” comes from the word “broceur” which means “small trader / trader” .
In the 11th century, the French began to regulate and trade agricultural debt on behalf of the banking community. Thus was born the first unofficial brokerage system.
But all that changed in 1602, when the Dutch East India Company became the first publicly traded business in which shareholders could own part of the business. In four centuries, investment has remained one of the greatest ways to increase wealth and support progress.
Over time, brokers have discovered several areas in which they can work to make a profit and help people achieve their personal goals. Thus, brokerage has developed into what it is today.
But let’s go back to our modern times and define the term “broker”. The explanatory dictionary says that it is a stockbroker who mediates the conclusion of commercial contracts or the performance of services.
It sounds complex, BUT, in the simplest words, a broker is an independent authorized person or institution that buys and sells on behalf of another person (ie you, the client). He acts as an intermediary between you and a certain investor. Brokers provide services that any company or individual needs, from insurance to loans, pensions or leasing. Then they are compensated in various ways, either by commissions or by payment. More specifically, the broker can be paid both by the client to whom he offers brokerage services and by the company to whom he sells the products. Most of the time, it is paid only by one of the parties .
Because the broker is more independent, it has products and services from several companies, not just one. Brokers are able to help you get the best option for your needs. Thus, they have well-developed investment plans, specially built for you. For example, Personal Broker offers customized solutions for any financial need.
Brokers can sell more products and services, such as:
- Guidance in the labyrinth of private investments or pensions
- Support in the purchase or sale of housing
- Offering a wide range of insurance
Even if not many people could afford to work with a broker before, nowadays, a broker is essential . This applies especially to those who do not always have the availability to take care of their investments. Fortunately, now, thanks to online brokerage that allows investors to trade at a lower cost, more and more companies or individuals want to access the stock market.
The financial market – in short
Because we are also talking about the financial market, it would be useful for you to define this term because we will use it throughout the text. Like any market, the financial one sells and buys goods, only it focuses more on the purchase, sale and holding of shares, currencies, bonds and commodities, etc.
It is important to remember that the financial market is not just about financial exchanges. The role of the market is to:
- Put savings into more productive use
- Determine the price of securities
- Trading values anytime, easier
- Decreases the cost of transactions
The financial market is important for those who want to invest or buy, and will always receive fair treatment. It also helps lower the unemployment rate because of the many job opportunities it offers.
There are several categories of financial markets, including the money market, capital, investment, foreign exchange and other derivatives. Because there are many types of financial markets, there are as many brokers. We can distinguish investment broker, credit broker, Forex broker, even real estate.
Now that we have established what the financial market eats, we can go on to detail the different areas in which a broker operates.