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Broker Or Brokerage Firm

Updated on March 17, 2023

A broker or Brokerage firm is an important financial intermediary in financial markets. Brokerage firms act as the vital link between clients and the Stock Exchanges. A brokerage firm buys or sells financial products for or on behalf of the customers. It charges a flat fee or commission for its services which can be a percentage of trades or transactions performed on behalf of the clients. From a customer’s point of view, the brokerage firm with minimum fee / commision will be beneficial. Customers must check the credentials of a broker before signing up.

Functions of a Broker or Brokerage Firm

Some functions of a Broker or Brokerage Firm are :
a. Managing documentation and paperwork for accounts and investments
b. Facilitating transactions or trades for clients
c. Acting as a bridge between the Stock Exchange and customer

Types of brokerage firms

Brokerage firms are categorized as per the services they provide and also per regulations under SEBI :
1. Full-service broker is a licensed broker/dealer providing a variety of services to its clients like research, advice, retirement planning, portfolio construction and analysis, estate planning, tax advice etc. They charge a high commission for these services.
2. Discount Broker – this is an online service provider with a basic transactional platform but no advisory or research. The fees charged is very low
3. Authorized Persons – they are more of a broker’s franchisee. They source business on behalf of a broker and pass it on to the firm. They thus represent the Brokerage Firm.
4. Robo Advisor – These are online advisories which provide client based, specific and customized portfolio services as per client’s profile and goals.