11 Types of Brokering Services

Updated 12/03/2024

Exchanges, transactions, agreements, and deals are happening all the time. Some happen directly, involving only two parties - the buyer and the seller.

However, others involve a third party in the form of a broker. This guide will provide information about brokering services, taking a look at who brokers are, why brokering services are important, and what kinds of services they can offer.

What Is a Broker?

A broker is an intermediary who facilitates transactions between buyers and sellers, ensuring both parties reach a mutually agreed-upon deal. Brokers can work in various industries, including finance, real estate, insurance, and more. They typically earn a fee or commission for their services, helping to execute trades, negotiate terms, and simplify complex agreements.

What Does a Broker Do?

The broker's main role is essentially to act as a middleman or intermediary between the buying and selling parties, connecting them together and carrying out various duties to speed up and simplify each transaction. 

When working with any of the different types of brokerage firms, buyers will be required to maintain a brokerage account. This account allows investors to move funds to and from a linked bank account and then use those funds to buy and sell securities.

The primary duties of a broker include mediation and negotiation between buying and selling parties. But they can also take on other duties and responsibilities, such as executing market trades, carrying out research to evaluate the pros and cons of a transaction or investment for a buyer, and so on.

In the United States, brokers and brokerage firms are regulated by several organizations. By law, they must meet the Securities and Exchange Commission (SEC) standards. Additionally, there are several self-regulatory organizations that reputable firms belong to that hold their members to standards based on federal law. Chief among these is the Financial Industry Regulatory Association (FINRA).

In exchange for their brokering services, a broker or brokerage firm may receive a flat fee or a percentage of the final sale amount.

Certain brokerage firms also maintain their own securities that investors can trade. These are known as broker-dealers.

3 Types of Brokers 

There are three main varieties of brokers and brokerage firms to be aware of if you are in need of or considering brokering services of some kind: online, discount, and full-service brokers.

1. Online Brokerage

Many brokers nowadays operate in the digital world. Online brokers offer their services on the internet, interacting with customers and relevant parties digitally and remotely, helping to ensure even faster transactions and added convenience, especially when the relevant parties are located in different cities, states, or parts of the world.

Online trading platforms have driven a great deal of innovation in the financial services industry. For instance, robo-advisors use computer algorithms rather than human input to actively manage portfolios. These services provide a low-cost alternative to a traditional financial advisor.

Online brokers can be either discount or full-service. However, some firms such as E*Trade have been online for the entirety of their existence.

As younger investors start their stock trading journies, mobile apps have become an increasingly-viable platform for brokerage firms. One company that has embraced this trend is Robinhood, which started out as a mobile-first online brokerage.

2. Discount Brokerage

Discount brokers tend to specialize in stockbroking services. As the name implies, they also tend to offer lower-than-average rates, carrying out various duties such as executing buy and sell orders on the stock market for their clients at a reduced rate.

These brokerages are designed to appeal to the general trading public rather than serious, high-value investors. As such, they don’t typically offer the same level of service as a full-service brokerage.

Investors who work with a discount brokerage may be limited in the types of securities they can trade or the level of financial advice they can access. In the recent past, though, many of these firms have started to offer educational resources that can help new investors make informed investment decisions without the direct assistance of a financial advisor.

Many discount brokerages choose to forgo trading fees entirely for certain types of securities. However, these fees are often still present for more niche avenues such as options trading.

Online brokerages have made it easier for firms to limit operating costs while still attracting a wide investor base, making online discount brokerages particularly popular.

Examples of leading discount brokerages include Charles Schwab, TD Ameritrade, and Ally Invest.

3. Full-Service Brokerage

A full-service brokerage offers a wide range of services to its clients, ranging from investment advice to research, retirement planning, investment products, and so on.

These brokerages may charge an annual fee or some other type of commission for their services. However, their benefits can make a huge difference to investors working with large sums of money or who want to take a more active, educated approach to investing.

One of the most common services full-service brokerages offer is investment advice from a financial advisor. These individuals have to go through a rigorous series of financial exams before working with investors so they have a wealth of knowledge to draw upon in helping you shape your investment strategy. Their financial planning guidance can help ensure that the entirety of your business portfolio can take full advantage of market conditions.

Fidelity is a great example of a full-service brokerage that also offers discount and online platforms.

11 Examples of Brokering Services

Brokers can provide a wide range of different services. Here are some examples of the different types of brokering services available to clients and interested parties:

1. Stocks
2. Credit
3. Real Estate
4. Business
5. Forex (foreign exchange)
6. Insurance 
7. Prime
8. Futures
9. Investment Funds
10. Retirement Accounts
11. Cryptocurrency

1. Stocks

A stock brokerage or stockbroker is an intermediary who specializes in carrying out buy and sell orders on stock or commodities markets for clients. They essentially carry out investments and sales according to the client's demands and needs, and it can be beneficial for those who don't have the time or knowledge to carry out investments themselves to hire a stockbroker to do this for them.

2. Credit

A credit broker is a broker who specializes in the brokerage of credit. In other words, they can help people get credit in the form of loans or lines of credit, connecting consumers to creditors and lenders who are willing to provide those kinds of financial services.

3. Real Estate

Brokers are big parts of the real estate world, with many buyers and sellers of real estate calling on the services of brokerage firms to help negotiate the sales of properties. Brokers can help both parties come to an agreement on the price and terms of a real estate sale, simplifying the process for both sides.

4. Business

Business brokers or brokerages are those that specialize in the buying and selling of privately-owned companies. For example, a small business owner looking to sell their business for the right price may bring in a broker to help facilitate the process and ensure that the owner gets a fair valuation and adequate terms for the sale.

5. Forex

Forex brokers specialize in the Forex (foreign exchange) trading market. This market offers limited access to interested traders, and many people have to make use of brokerages in order to actually buy and sell on the Forex platform.

6. Insurance

Brokers also play a key role in the insurance industry. They can have a range of roles and responsibilities, such as helping those who are searching for insurance get the best possible policies, as well as assisting insurance companies in drawing up adequate policies for applicants and attracting more customers, too.

7. Prime

A prime brokerage is one that offers a range of financial services centered around large and complex operations like hedge funds. They assist with the mediation and processes involved in facilitating complicated trades and transactions and are typically employed by some of the biggest financial institutions in the world.

8. Futures

There are also futures brokers and brokerage firms, providing brokering services focused around futures contracts. Futures contracts are essentially agreements that are made between two parties concerning the transaction of an asset or product at a certain price and time in the future.

The Commodity Futures Trading Commission (CFTC) regulates the buying and selling of futures contracts, which is also known as derivative trading.

9. Investment Funds

Many brokerages, particularly broker-dealers, offer investment funds as tradeable securities. These funds are priced based on the performance of an industry, financial market, or stock exchange and offer investors a streamlined way to diversify their portfolios.

The mutual fund is one of the most time-honored examples of an investment fund. These investment vehicles are a pool of invested funds that are actively managed to best represent the fund's goals. Mutual funds can only be traded at the end of the trading day and often come with fees and investment minimums.

Another recent entry to the investment fund marketplace is ETFs acting similarly to mutual funds. However, they are passively managed and can be traded similarly to stocks. As such, they are often free of fees and investment minimums.

10. Retirement Accounts

Brokerage firms can help individuals and businesses maintain retirement accounts that are easy to use and tuned to investors’ financial goals.

Major firms such as Fidelity and Vanguard offer individual retirement accounts (IRAs), employer-sponsored 401(k) plans, and other investment vehicles to help you and your employees plan for retirement.

11. Cryptocurrency

One of the more recent additions to the financial products marketplace, cryptocurrencies are virtual currencies that are secured by cryptography and distributed digitally. They can be used for transactions but are most popular as investment vehicles.

There are many different types of cryptocurrencies, and most types require you to maintain an account with a crypto-specific brokerage firm. However, traditional firms such as Robinhood have started to offer cryptocurrency trading in some of the most popular currencies such as Bitcoin.

Brokerage Services Facilitate Transactions and Trades

Overall, it's clear to see that brokers have a key role to play in the business world, assisting across various industries, from stock investments to real estate, and helping transactions and trades flow smoothly, seamlessly, and speedily between parties.

About the Author

Sydney Wess SEO Manager at Clutch

Sydney Wess is a SEO manager who focuses on strengthening organic performance and building topical authority for Clutch.

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