Posted on April 24, 2019
How Stock Brokers Invest Client Money And Manage Assets
Stock brokers are regulated traders in stocks and securities who execute trades on behalf of paying clients. They can work mainly for corporate clients, or for individuals, and they can have as any clients as they can handle. To act as a stock broker, you need to be licensed, as the stock exchange would not be able to allow just anyone to come in off the street and make purchases. If you want to obtain this license, you will need to train for the career and pass several examinations, depending on the country in which you want to practice. It is also possible to combine the career of stock broker with that of investment advisor, and help clients to make more informed investment choices.
A good stock broker and investor will also often trade on their own account, as they seek to profit from the buy and sell signals which their systems generate. In some cases, someone who was once a broker trading for paying clients will decide to go it alone and trade only for themselves. In this case, they really cease to be brokers at all and are simply dealers. It is possible for anyone to trade in stocks and their derivatives from their own home office, using the same advanced software which the brokers use.
Many investment banking houses and institutional investors will arrange stock issues on behalf of businesses who are seeking to raise capital. Some of these companies will only just be starting to trade and will be being floated on the stock exchange for the first time. Others will be long established, but just looking for a new influx of capital to help with expansion into more projects or more markets. The institutional investors make many of their purchasing choices based on the stock issues of these institutional investors.
The roles which stock brokers play can be tightly defined, in that they operate exclusively on a stock exchange buying and selling securities, or it can be broad enough to encompass advisory roles as well. It is possible for someone with a stock broker license to also be a registered investment advisor, and to offer comprehensive advice on all aspects of investing and planning a life. This will cover everything from the mortgage loan the client needs to secure their home to the way their ongoing income is invested. This often includes an account which will remain tax free if it is retained until retirement.
The art of personal planning can stretch the abilities of a stock broker to a whole new level. Most individuals who use a financial advisor are looking for an all round solution which will get them the best deal they can get for their money. The mortgage is absolutely critical to this, for several reasons. Firstly, a home is far more than just an investment, it is something which will affect the quality of life of your entire family for a long time to come. If this loan is optimized, it can leave significant income available for other investments.
The most important investment after the mortgage is usually the retirement plan which is created for the client. This plan will usually involve the creation of an account to hold mutual funds, because these can be held tax free into retirement. The stock broker or fund manager will be able to select which stocks go into the fund, although the owner of the investment always retains overall control. Once this solid investing platform has been created, the client can then consider more risky investments such as derivatives, to try to accelerate the growth of the fund.
The position which stock brokers and fund managers hold in the financial services industry gives them a high level of responsibility, and this can even work against them if they do not have discipline. There are always going to be opportunities to use information which is intended for the benefit of clients when you are trading your own account. This practice is known as front running, and it is strictly illegal. You will need to be absolutely sure that you have the moral resolve to avoid this type of activity, which can easily be discovered through electronic tracking.
If you decide that working in a firm of stock brokers is what you want to do, there will be a long period of studying and passing examinations before this will be possible. All stock exchanges throughout the world have a licensing system which prevents a layman from walking in and trading stock. The courses which you will need to take to prepare you for these examinations are now offered through a wide variety of colleges. These include the traditional colleges which have always produced investment banking and broking personnel, and the specialist online colleges which are now producing stock brokers.