What Is a Stockbroker? (And Do I Even Need to Use One?)
Whether you need a stockbroker or a financial adviser depends on several factors, including goals, time availability and available cash.


Nowadays, trading stocks is as frictionless as it's ever been. You spend a few minutes opening a brokerage account (often for free), fund it, then do your trading via a couple of clicks of a mouse or a few taps of a smartphone screen.
Rarely is another human involved in the process, and when one is, it's often just for technical support when something goes wrong on the brokerage platform.
That's wildly different than how things worked decades ago. You needed a lot more capital to work with, for one, plus you had to pay (usually hefty) fees to buy and sell stocks.
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Anytime you wanted to make a trade, you needed to pick up a phone and call a stockbroker — an intermediary whose job it was to buy and sell stocks on your behalf — to get it done.
We've already answered the first half of the headline without finishing the introduction, and now we'll knock out the second half: If you wanted, you could go your whole life without ever using a human stockbroker to place your trades for you.
We'll spend the rest of the article getting to the heart of what you really meant to ask.
'Do I need a human to help me select investments?'
When people think of a stockbroker, they often think of the cold-calling brokers of the 1980s and 1990s that were … "popularized" by movies such as The Wolf of Wall Street and Boiler Room.
Fortunately, most people avoid assuming all stockbrokers are criminals and instead take away a more practical observation:
Stockbrokers can provide advice.
It's that element — the advice — that underpins people's curiosity about whether they should use a stockbroker. Said differently: When people wonder about using a stockbroker, they wonder whether they need a human, not necessarily to place trades, but to provide guidance about stocks and other investments.
It's an increasingly relevant question, given how technology has drastically altered the world of financial information and advice in the past couple of decades.
There have long been alternatives to human stockbrokers — Hulbert Financial Digest has been tracking investment newsletter recommendations since 1980 and Kiplinger's own Investing for Income has been around since 2012.
But the internet helped these publications proliferate and gave birth to financial data-and-analysis sites that have helped many investors become their own source of stock research.
More recently, technology has enabled the creation of robo-advisers, with brokerage firms able to offer limited levels of automated portfolio management service: assessing risk tolerance and investment goals, building a portfolio, rebalancing and more.
Naturally, with such a wealth of resources at our literal fingertips, it's fair to wonder: "Do I really need to get another human involved?"
Stockbrokers vs financial advisers
It can be beneficial to get another person involved. The thing is, when many people think "stockbroker," what they really mean is "financial adviser."
Here's how to tell:
A stockbroker is primarily concerned with buying and selling securities on behalf of their clients.
- Advice: Usually limited. Advice largely revolves around individual investments and where to invest based on market trends.
- Obligation to clients: Historically, this was limited to "suitability," ensuring that recommendations were merely appropriate for their clients. The SEC's 2020 implementation of Regulation Best Interest (Reg BI) upgraded that standard somewhat, requiring that initial recommendations be in the "best interest" of clients.
- Compensation: They're often paid via commissions on executed trades, in which case, they'd have a natural interest in encouraging more frequent trading.
A financial adviser (or investment adviser or other similar positions with similar duties) might be brokers themselves, and thus buy and sell investments on your behalf — but they might instead have a broker-dealer take care of that responsibility. What sets them apart is that they provide a much different level of service.
- Advice: Much more holistic, usually involving not just individual investments but also the construction of your portfolio as a whole. It can also expand into retirement planning, estate planning, tax planning and beyond.
- Obligation to clients: Financial advisers can have a "fiduciary" duty to clients, which is effectively the highest level of obligation. Unlike stockbrokers, whose requirement to act in the "best interest" of clients is limited to initial recommendations, fiduciaries must always act in the client's best interest throughout their entire engagement. (Note: Some financial advisers don't have a fiduciary duty. If this is important to you, explicitly choose one who does.)
- Compensation: They're usually paid by fees. Sometimes, these fees are service-based, such as a fixed fee for designing a financial plan. But ongoing management is frequently paid via an assets under management (AUM) fee that aligns an adviser's compensation with the client's success.
Are you looking for someone who can occasionally pitch you on stock ideas and help you make the most of a volatile market? You probably want a stockbroker.
Are you looking for someone who will help guide or manage your portfolio, and maybe provide advice that pertains to other parts of your financial life? You probably need a financial adviser.
A few more questions to ask yourself
Not quite sure whether to go it alone, use a robo-adviser or enlist the help of a human — whether that's a stockbroker or financial adviser? Here are a few questions to ask:
Am I comfortable managing money myself? If you enjoy learning about investing and feel confident in your ability to make decisions, you're probably better off with DIY financial data solutions.
If you don't consider yourself knowledgeable about the market, you'll want to consider a robo-adviser at the least, if not enlist an actual professional.
Do I have much time to dedicate to my investments/financial planning? Even if you have a high level of financial acumen, if you simply don't have the time to research investments, a robo-adviser, a stockbroker and — especially if your needs go beyond just investment advice — a financial adviser can provide the help you need.
How important are costs to me? DIY investing is as close to free as you're going to get — many online brokers charge no commissions for stock and exchange-traded fund (ETF) trades and financial data tools such as Yahoo! Finance and Morningstar have robust free offerings.
If you want help but want to minimize costs, robo-advisers typically charge considerably less in AUM fees than their human counterparts (but again, that also reflects their limited level of personalized service and breadth of offerings).
How much money am I working with? If you don't have much in the way of assets (a few hundred or a few thousand dollars), you'll likely need to stick with DIY investing.
While robo-adviser services are available with low minimum investments (sometimes less than $100!), their fees might be structured in a way that's punitive for low-asset clients.
Human stockbrokers might not require high minimum assets to use their services, but the fees could be cost-prohibitive. Financial advisers typically require the highest level of assets (in the tens or hundreds of thousands of dollars) to become involved.
Do I have straightforward goals? This often goes hand in hand with age.
When you're younger, your financial goals are typically limited to "grow my money," in which case, DIYing it with a few index funds and individual stocks can get the job done.
If you want to be a little more tactical, you can employ the use of a robo-adviser — and if you want to be especially aggressive, a stockbroker could help you identify opportunities.
But as your goals become more crystallized, and especially as you age and need to transition from wealth accumulation (growth) to wealth preservation (defense), a financial adviser can best meet those needs.
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Kyle Woodley is the Editor-in-Chief of WealthUp, a site dedicated to improving the personal finances and financial literacy of people of all ages. He also writes the weekly The Weekend Tea newsletter, which covers both news and analysis about spending, saving, investing, the economy and more.
Kyle was previously the Senior Investing Editor for Kiplinger.com, and the Managing Editor for InvestorPlace.com before that. His work has appeared in several outlets, including Yahoo! Finance, MSN Money, Barchart, The Globe & Mail and the Nasdaq. He also has appeared as a guest on Fox Business Network and Money Radio, among other shows and podcasts, and he has been quoted in several outlets, including MarketWatch, Vice and Univision. He is a proud graduate of The Ohio State University, where he earned a BA in journalism.
You can check out his thoughts on the markets (and more) at @KyleWoodley.
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