To participate in that world, investors generally engage the services of a broker or dealer in some form or fashion, making a review of those terms an interesting place to begin exploring.
Brokers
Brokers and dealers are the U.S. regulatory terms and, as is often the case with legal terms, they are not very intuitive to many people. While the words are often seen together, they actually represent two different entities. A broker executes orders on behalf of clients. To the regulators, this means the entity through which investors hold a brokerage account. To investors, it generally means the person who helps them buy and sell securities. A bit of confusion occurs here, as the industry also has lots of terms for a person who helps investors buy and sell securities, including financial advisor, investment advisor, and registered representative. For the moment, we’ll stick with the strict legal definitions to provide a baseline for further exploration.
Think of the legal entity that facilitates security trading as an agent acting on behalf of investors. When you want to buy or sell a security, the entity (in the case of online brokerage accounts for example) that helps you make that transaction is your agent. When you pay a commission to make a trade, you are making that payment to an agent. The terms agent and broker can be used interchangeably.
To read more on " How to pick a Broker Dealer the right way"
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