What is an investment broker? – Forbes Advisor

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While you can invest in the stock market yourself through an online brokerage, you may wonder if an investment broker can make your life easier.

Investment agents can guide you through the investment process and make recommendations based on your goals. However, they tend to charge high fees, so they are not for everyone. Here’s how to determine if an investment broker is right for you.

What does an investment broker do?

An investment broker is a financial professional who conducts investment transactions for a client. These professionals can buy and sell securities, such as stocks, bonds, mutual funds and other investment products on your behalf.

They can work either in the interest of their clients (referred to as a broker), their own accounts (referred to as a trader) or both. There are also online brokers, which are trading platforms that usually charge less fees or no commissions compared to working with a person.

An investment broker is not the same as a financial advisor. A full-service investment broker can conduct market research and make investment recommendations for you, while a financial advisor will take a look at your overall financial situation and create a holistic plan—beyond investing—to help you achieve your financial goals.

How does an investment broker make money?

Investment brokers make money by charging fees and commissions from the trades they make on your behalf. These fees are referred to as brokerage fees and include:

  • Mutual fund fees. These are fees that brokers earn from buying and selling mutual funds. There are three different types of mutual fund fees, which refer to different share classes. Class A shares, for example, charge an upfront commission that will go directly to your broker. Class B shares have a fee if you don’t hold them for a certain amount of time. Class C shares do not have an upfront fee, but do have high maintenance fees.
  • Assets under management (AUM) fees.. AUM fees refer to a percentage of the total value of your portfolio that is charged as a fee. For example, a 1% AUM fee on a $30,000 portfolio is $300.
  • Account Fees. Brokers may also charge fees to maintain an account, such as a monthly maintenance fee.
  • Trading spreads. A trade spread refers to the difference between the amount you pay for a security and the amount paid to the issuer. A broker will profit the difference. In large stocks, spreads are usually insignificant amounts, such as less than a single dollar. Trades in smaller stocks may have larger spreads.
  • Trading commissions. Every time an investment broker makes a trade, they receive a commission. Online brokers often offer commission-free stock trading.

As you can see, there are a variety of fees that investment brokers can charge. Before you decide to work with a broker, understand how much it will cost. Do your due diligence and add any possible fees to make sure you’re getting a good deal.

Do I need an investment broker?

Investment brokers can be helpful for people who are new to investing and also people who are looking to build a strong investment strategy.

Your investment goals and strategy will determine what type of investment broker you should work with. You’ll want to align those goals and strategies with a broker’s fees.

For example, if you are an investor who wants to make frequent trades, working with a broker that has high trading commissions is likely not a good fit. If you have a smaller portfolio, working with a broker that has high AUM fees will also not be beneficial for your purposes.

How to find an investment broker

The endless amounts of investment brokers out there can make it overwhelming to find one to work with.

To choose an online broker, look for unbiased comparisons and rankings from trusted publications. These comparisons usually include an overview of fees, minimum balance requirements and the pros and cons of using the services. If you are new to investing, consider the best online brokers for beginners.

Before working with any investment broker, whether it’s an online broker or an actual person, you should research their credentials, background and any disciplinary action they may have faced. You can use FINRA’s BrokerCheck tool to search for an individual or brokerage firm by name and city, state, or ZIP code.


An investment broker is someone who trades securities on your behalf. They make money by charging clients a variety of fees, including trading commissions, account maintenance fees, AUM fees, and mutual fund fees.

Finding an investment broker that suits your needs can be done through independent research and reading rankings from trusted financial publications.

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Start with a financial advisor with Personal Capital to work out your financial strategy

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