The Functions of an Investment Broker

We always hear in the movies people saying they need to contact their brokers. News reports come out and the first thing on people's minds is to call their brokers so that they can change their investments, hopefully in more positive directions. But, what exactly does an investment broker do? What are the various functions of an investment broker? That is precisely what we will outline in this discussion.

First and foremost, investment brokers bring buyers and sellers together. The securities system or process does not allow for unlicensed people brokering transactions. This means that individuals normally do not go directly to the seller and offer their funds as investments. Even in banks, where the general public is considered customers, the bank forwards the monies on to specific "funds" or investment products that they have created for customers. For example, they may have bundled several stocks into one and given it a name so that it becomes its own unique program into which bank customers invest. Further, the level of risk is typically less with the bank's investment than if someone invested in the stock market. Many bank products guarantee customers their initial principle. Therefore, the functions of an investment broker will differ depending on whether she/he works for a financial institute or a brokerage firm on Wall Street.

Another function of an investment broker is the disclosure of certain information, such as the level of risk involved in a particular investment, whether any portion of the investment is guaranteed, the costs of the investment and/or the management of the investment, historical data on the seller or originator of the investment, statistics on past performance of the investment, and other information that directly relates to the client making a decision.

Additionally, investment brokers should fully understand the client's goals and know what they hope to accomplish with the investment. By ascertaining information such as the client's budget and financial capabilities, it will be much easier for the investment broker to find the appropriate investment for the customer. Big firms typically have research departments which aid the broker in recommending the right fit.

In cases where investment brokers have complete control of a portfolio, they might buy and sell on the client's behalf without immediate authorization, and they may be responsible for monitoring the account for any adverse changes. Depending on the broker's education, level of expertise, and licensing, the investment broker may be qualified to manage accounts which include bonds, stocks, commodities or currency trading.

Another function of the broker is to maintain and uphold integrity. While this is somewhat of an intangible personality trait, as it cannot always be measured, it is still important, nonetheless. The client needs to know that the broker can be trusted to act responsibly and in a timely fashion. There must be evidence that the broker is working on behalf of the client's interests and not toward her/his own goals or rewards.

Finally, the functions of an investment broker will be quite different depending on the type of brokerage firm represented or the business structure of the individual broker. Discount brokerages offer less services than more expensive firms, simply because they are saving their clients the fees. There is a trade-off in this scenario. And then, online companies may offer something different again, than Wall Street firms. Because functions vary dramatically, it is important for potential clients to ask plenty of questions in the beginning before making any decisions regarding an investment.