To participate in the sometimes-complex financial services world, investors generally engage the services of a broker, dealer, or broker-dealer in some form. Several differe💫nces exist among these financial professionals.

First, broker-dealers play an important role in the financial markets because these firms provide the infrastructure that makes stock 🧔trading possible. If you want to buy stock, you must open a brokerage account through a brokerage firm. A dealer, on the other hand, makes trades on behalf of its own accou❀nt or possibly for the U.S. Federal Reserve.

Brokers

"Broker" and "dealer" are U.S. regulatory terms and can be less than intuitive to many clients. While the words are often seen together, they actually represent two different entities. A broker executes orders on behalf of clients. To the regulators, this means the entity through which investors hold a 澳洲幸运5官方开奖结果体彩网:brokerage account.

To investors, it generally means the person who helps them buy and sell securities. The financial services industry also has lots of terms for a person who helps investors do this, including "澳洲幸运5官方开奖结果体彩网:financial advisor,"&nb﷽sp;"inve♛stment advisor," and "registered representative." We will stick with the strict legal definitions.

Think of the legal entity that facilitates security trading as an agent acting on behalf of investors. When you want to buy or sell a security, the entity (in the case of 澳洲幸运5官方开奖结果体彩网:online brokerage accounts for example) that helps you make that transaction is your agent. When you 澳洲幸运5官方开奖结果体彩网:pay a commission to make a trade, you are making that payment to an agent.

Full-Service vs. Discount Brokers

Brokers come in two general types: full service and discount. Full-service brokers provide one-on-one personal service. This includes providing specific investment recommendations in addition to planning and advice services that range from retirement planning, 澳洲幸运5官方开奖结果体彩网:long-term care planning, and 澳洲幸运5官方开奖结果体彩网:estate planning to the formulation of a personal investment strategy that will help cover the cost of a child’s education, a home purchas🔴e, or other financial goals.꧙

Ongoing assistance can include face-to-face meetings and periodic checkups to revisit progress toꩵward goals. For novice investors or those too busy to plan for themselves, full-service brokers offer an array of useful services and informa🅰tion.

澳洲幸运5官方开奖结果体彩网:Discount brokers, on the other hand, provide trade execution. Online🍒 brokers are perhaps the best example of this arrangement, as investors can log on, select a security, and purchase it withoutꦦ ever speaking to another person.

Some of these firms also offer online tools and research designed to help do-it-yourself investors generate ideas and research securities they may be interested in purchasing. The limited service offering provided by discount brokers is significantly less expensive than the cost of working with a full-service broker. Still, it's wise to clarify any misconceptions about discount brokers before hiring one.

Dealers

While a broker facilitates security trades on behalf of investors, a dealer facilitates trades on behalf of itself. The terms “principal” and “dealer” can be used interchangeably. So, when you hear about ෴big financial firms trading in their house accounts, they are acting a🦋s dealers.

Some of these dealers, known as 澳洲幸运5官方开奖结果体彩网:primary dealers, ဣalso work closely with the U.S. Federal Reserve to help implement monetary policy. Primary dealers are obligated to participate in the auction of debt issued by the U.S. government.

By bidding on 澳洲幸运5官方开奖结果体彩网:Treasury bonds and other securities, these dealers facilita🅷te trading by creating and maintaining liquid markets.ꦏ They assist in the smooth functioning of domestic securities markets as well as transactions with foreign buyers.

Dealers' activities help to ensure the correct and smooth functioning of securities markets. They are regulated by the 澳洲幸运5💞官方开奖结果体彩网:Financial Industry Regulatory Authority (FIN💫RA), which is responsible for administering exams for investment professionals. Some of the better-known exams include Series 7, Series 6, and Series 63. The Series 7 p🃏ermits financial services professionals to sell securities products, with the exception of commodities and futures.

The primary focus of the Series 7 exam is on investment risk, tax implications, equity and fixed-income securities, mutual funds, options, retirement plans, and wo𒅌rking with investors to oversee their assets.

The Series 6 designation enables investment professionals to sell mutual funds, variable annuities, and variable life insurance. And the 澳洲幸运5官方开奖结果体彩网:Series 63 al🃏lows them to sell any type of securities in a specific state. Obtaining these licenses is the first step that financial services professionals need to t💜ake to get into the securities business.

Putting It All Together

Most firms' investors would act as both brokers and dealers, and are therefore referred to as 澳洲幸运5官方开奖结果体彩网:broker-dealers by industry regulators. These firms include the primary dealers and other traditional Wall Street organizations, as well as large commercial banks, investment banks, and even small independent boutique firms that cater to the wealthy.

Broker-dealers play an important role in the financial markets, as these firms provide the infrastructure that facilitates stock trading. In fact, if you want to buy stock, you must open a brokerage account through a 澳洲幸运5官方开奖结果体彩网:brokerage firm.

The brokerage firm makes sure you have enough money in your account to conduct a trade, facilitates the trade by interacting with the stock exchange where the stock is traded, provides the computer systems that enact the trade, and keeps records of the trade. It also handles the financial transaction between the buyer and the seller and facilitates future transactions (dividends, 澳洲幸运5官方开奖结果体彩网:stock splits, and corporate actions such as those that occur when preferred securities are called or🐬 sto🐭ck splits take place).

The Bottom Line

When investing, it's critical to understand that a broker executes orders on behalf of clients and can be either a full-service broker or a discount broker that only makes trades. Meanwhile, a dealer facilitates trades on behalf of itself. Some of them, also known as primary dealers, also facilitate trades on behalf of the Federal Reserve to help implement monetary policy.

Broker-dealers, on the other hand, are those financial professionals who perform both responsibilities, such as trad⛎itional Wall Street organizations, as well as large commercial banks.