Stock brokers

A stock broker or stockbroker or stock brokerage is someone or a firm who performs transactions in financial instruments on a stock market as an agent of his/her/its clients who are unable or unwilling to trade for themselves, common misnomers: financial planner, financial consultant, or financial advisors.

Stockbrokers also sometimes or exclusively trade on their own behalf, as a principal, speculating that a share or other financial instrument will increase or reduce in price. In such cases the term broker makes little sense and the individuals or firms trading in a principal capacity sometimes call themselves stock traders or simply traders.

History

Since the 1980s stockbroking firms have also been allowed to be market makers as long as the appropriate Chinese walls are put in place.

With the advent of automated stockbroking systems on the Internet the client often has no personal contact with his/her stockbroking firm. The stockbroker's system performs all the stockbroking functions: it obtains the best price from the market and executes and settles the trade.

Things one should know before consulting a Stock Broker

Using a stock broker for active management of a Stock/Mutual Fund Portfolio is totally unnecessary when a passive management alternative is available for long term investing within the confines of a Tax-Sheltered Retirement Accounts. However, many prefer to use and pay for the services of a broker because they feel more comfortable making decisions about their finances with the interactive guidance of a licensed advisor.

When using a stock broker for financial guidance, one must be made aware that they do get paid on a commission, based on the stock/mutual fund they sell be if from the following: Class Distinction, 12b-1 distribution fees, Loaded Fee such as entry or exiting fees i.e Deferral sales charges, etc. Thus a conflict of interest arises concerning a stock broker who offers his/her service as a financial planner, because their revenue is generated as a direct result of your investment in the stock/mutual fund that they broker to you. Thus your return on investment is not as great, and the advice they give you might not be in your best interest. However, some mutual funds and stocks can only be purchased through a broker in such cases their services are required to purchase the financial instrument in question.

Cases

The following is the case in the UK: When acting as an agent, the stockbroker charges the client a flat fee and/or a percentage-based commission for undertaking the trade and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client the broker is obliged to inform the client and no commission is charged.

The following is the case in the US: When acting as an agent, the stockbroker typically charges the client a flat fee and/or a percentage-based commission for undertaking the trade and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client the broker informs the client and a charges the client a markup or markdown from the prevailing market price.

Other jurisdictions are thought to have similar rules.

Terms

Front office This is a description of the part of the firm that is "client facing". The sales staff, brokers and traders are part of the front office. Functions of the front office include acquisiton and entry of orders, fulfillment of the orders, and all the regulatory reporting for the orders.

Back office The back office is where the clearance processing of the trades is done. Transfer of securities and money and the tracking of "failure to deliver" is handled. Securities lending for a brokerage firm, wherein shares of a security that is being sold short are located to insure they can be deliviered, is usually included in the back office as well.

• Prime brokerage
• Retail broker

Famous Stockbrokers and Their Spouses

Former Brokers:

• Brian Dennehy -- Actor Donehey worked as a broker for a time at the same firm as Martha Stewart.
• Michael Milken -- The notorious financier came to fame at Drexel Burnham and Co. in the 80s. The Wharton School graduate was later convicted of fraud involving dubious junk bond issues and served time in prison. Today, he and his brother Lowell oversee countless charitable endeavors and Milken has a posh Jewish-based high school named after him in Bel Air, CA.
• George Murphy -- Silent film and early talkies star Murphy worked for a time as a Wall Street runner, according to David Ragan's "Stars of the '30s."
• Hemish Shah -- Late English poker player, who left stocks for poker, going on to win a World Series of Poker bracelet shortly before his early death at age 33.
• Martha Stewart -- After she gave up modeling in the late 60s, Stewart worked as a broker on Wall Street for 7-8 years before marrying Andy Stewart and launching her lifestyle empire from her farm, Turkey Hill, in Connecticut. Ironically, it was over a dispute of a stop loss order on her personal ImClone Systems shares that landed her in prison. Though Stewart insisted otherwise, a stop loss order had never been placed by her broker, society darling Peter Bacanovic, and the stock sale for Stewart was deemed insider trading. Stewart was released from prison after serving 6 months at "Camp Cupcake" in the Spring of 2005.
• Jimmy Wales -- Creator of Wikipedia, worked as an options trader for many years while building his personal fortune.

Later Brokers:

• Larry Buster Crabbe -- Actor and former Olympic Swimmer Crabbe became a stockbroker and businessman after his career as Tarzan and Flash Gordon passed him by. He even owned a Southern California Swimming Pool building company in later years.

Famous Spouses and Children of Brokers:

• Anne Baxter -- Actress Baxter's third and last husband, David Klee, was a stockbroker.
• Marcia Cross -- Television actress Cross, best known for her role as Bree Van De Kamp on ABC-TV's Desperate Housewives, announced via her publicist in the Summer of 2005 that she accepted the marriage proposal of Tom Mahoney, her stockbroker-boyfriend.
• James Dunn -- Irish-American 30s matinee idol, Dunn was the son of a broker, "who either had nothing or a million."
• Leslie Howard -- Actor Howard, famed Gone with the Wind star, was the son of a stockbroker's assistant.
• Vivien Leigh -- Actress Leigh, also of GWTW and Sir Laurence Olivier's muse, was the daughter of a wealthy English broker.
• Dina Merrill -- Actress Merrill, one-time wife of Cliff Robertson, was the daughter of E.F. Hutton, founder of the firm known for its jingle: "When E. F. Hutton talks, people listen," and cereal heiress Marjorie Merriweather Post.
• Colleen Moore -- Actress Moore's second of her four husbands, Albert Parker Scott, was a broker as well.
• Emily Post -- The maven of manners, formerly Emily Price, was married to a Mr. Post, a broker on Wall Street at the turn of the century. She divorced him over infidelity and started writing to support her boys, which was quite unfashionable and rather scandalous at the time. She pressed on and became a household name with her syndicated column on etiquette and radio appearances.
• Preston Sturges -- The famed director of such classic screwball comedies as The Palm Beach Story was adopted by his stepfather, Solomon Sturges, a successful broker based in Chicago in the 20s.