What Is a Retail Broker?

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A brokerage firmor simply brokerageis a financial institution that facilitates the buying and retail brokerage account definition of financial securities between a buyer and a seller. Brokerage firms serve a clientele of investors who trade public stocks and other securities, usually through the firm's agent stockbrokers.

The staff of this type of brokerage firm is entrusted with the responsibility of researching the markets to provide appropriate recommendations, and in doing so they direct the actions of pension fund managers and portfolio managers alike.

These firms also offer margin loans for certain approved clients to purchase investments on credit retail brokerage account definition, subject to agreed terms and conditions. Traditional brokerage firms have also become a source of up-to-date live stock prices and quotes.

A discount broker or an online broker is a firm that charges a relatively small commission by having its clients perform trades via automated, computerized trading platforms rather than by having an actual stockbroker assist with the trade. Most traditional brokerage firms offer discount options and compete heavily for client volume due to a shift towards this retail brokerage account definition of trading.

Other ways to lower costs for these brokers is by executing orders only a few times a day by aggregating orders from a large number of small investors into one or more block trades which are made at certain specific times during the day.

They help lower costs in two ways:. Since investor money is pooled before stocks are bought or sold, it enables investors to contribute small amounts of cash with which fractional shares of specific stocks can be purchased. This is usually not possible with a regular stockbroker. Many broker-dealers also serve primarily as distributors for mutual fund shares. These broker-dealers may be compensated in numerous ways and, like all broker-dealers in the United States, are subject to compliance with requirements of the US Securities and Exchange Commission and one or more self-regulatory retail brokerage account definitionsuch as the Financial Industry Regulatory Authority FINRA.

The forms of compensation may be sales loads from investors, or Rule 12b-1 fees or servicing fees paid by the mutual funds. From Wikipedia, the free encyclopedia.

Comparison of online brokerages in the United States. Retrieved 10 October British Columbia Securities Commission. Thomas Smith 6 March Regulation of Investment Companies.

Lexis Nexis Matthew Retail brokerage account definition. Retrieved from " https: Brokerage firms Financial services. Views Read Edit View history. This page was last edited on 8 Februaryat By using this site, you agree to the Terms of Use and Privacy Policy.

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Savers put money to work within financial markets to build toward important life goals, such as first-home purchases and retirement funding. Brokerage firms are a part of this process, as they facilitate transactions that match corporations in need of capital, alongside savers in search of investment opportunities.

Retail brokerages serve to effectively level the playing field between professional Wall Street traders and smaller Main Street savers. The Securities and Exchange Commission identifies brokerage firms as fiduciaries that execute financial transactions on your behalf. Retail clientele differs from institutional business, which includes larger corporations, private banks and independently wealthy individuals. Retail brokers use information technology to organize buyers and sellers together within financial markets.

Stock markets operate as large auctions, and individual stock trades are executed at points where the lowest offering and highest bidding prices intersect. Retail brokerages may be classified as either traditional or discount brokerages. Traditional brokerages are associated with financial advisers that offer recommendations on stock market investments, insurance products and employee benefits.

Advisers may charge annual fees to write comprehensive financial plans for retail clients. Discount brokerages, however, simply take orders and clear trades without providing advice.

Discount brokerages are notable for their online investment capabilities and low commissions. This may be a good option for cost-conscious consumers who prefer to research their own investments. Retail brokerage firms provide liquidity for smaller investors, allowing them to participate within the stock market. Liquidity is defined as your ability to convert any asset into cash.

Alternatively, retail brokerages provide Main Street investors with access to stock market technology for relatively small trading commission costs. Retail brokerages often provide extensive financial education to help prospects and clientele effectively navigate the stock market. Investment seminars, newsletters and consultations alert savers to the benefits of money management, and encourage them to invest wisely.

The Securities and Exchange Commission warns online brokerage clients against phishing scams. Phishing describes a process in which criminals steal your brokerage account information to log in and coordinate unauthorized trades and cash balance transfers.

Anti-virus software minimizes the risks of hackers gaining entry into your personal information. Retail clients who hire full-service brokers are also susceptible to churning. Churning relates to recommendations that call for heavy trading activity within your account simply to increase brokerage commissions, rather than to improve your total returns.

Definition of a Retail Brokerage Account. Share Share on Facebook. Retail brokerages help smaller investors make money. Please enter a valid email.