Wednesday’s Word: Broker-Dealer

By Geoff Hafer, Spring 2017 Student Intern

We’ve all heard the term before, but do you really know what a broker-dealer can and cannot do for you?

What is a broker-dealer?

According to FINRA, “A broker-dealer is a person or company that is in the business of buying and selling securities – stocks, bonds, mutual funds, and certain other investment products-on behalf of its customers (as broker), for its own account (dealer), or both.  Individuals who work for broker-dealers – the sales personnel whom most people call brokers – are technically known as registered representatives.”

What exactly do broker-dealers offer?

The services broker-dealers offer can vary widely but fall generally under either full-service and discount brokerage firms.  Full-service firms tend to have representatives well versed in investment planning services, can handle just about any financial transaction, and typically charge more per transaction for said expertise.  Discount broker firms overall are cheaper but you will have to do all of the leg work on your own.

When deciding on a broker-dealer it is important to do your homework.  Virtually all broker-dealers must register with the Securities and Exchange Commission (SEC) and be members of FINRA.  Additionally, the individual registered representatives themselves must register with FINRA, pass an examination, and be licensed in the state they are practicing.  Background information on the broker-dealers and the individual registered representatives can be obtained by using FINRA BrokerCheck.  This will allow you to ensure the broker-dealer is registered, representatives are licensed, and you can even view any disciplinary history prior to making your final decision.