The Sharebroker

What does a Sharebroker Do?
In order to buy shares or stock you need a sharebroker to help with the transaction. The sharebroker (also known as a stockbroker) is the link between you and the Stock Exchange.

The role of the sharebroker is:

  1. A sharebroker is a salesperson.
  2. A sharebroker works for a stock brokerage house.
  3. The sharebroker’s job is to carry out your transactions.

What to Expect from a Broker
A broker has to offer services that will enable you to receive information to help you make investment decisions. Every broker is bound by the rules and regulations of the Stock Exchange, as well as other regulations and legislation.

Brokers have to supply a legally binding contract when they carry out any share transactions for you. You can expect a helpful information service from them. Remember that brokers are there to help you, so you should make sure that they are looking after your best interests. Don’t be afraid to ask questions if you have any queries.

There are many ways to buy and sell shares. The type of service you use will depend on the type of assistance you need. If you are investing in the sharemarket, it is often a daunting experience, especially if you are new. You have to try and make sense of all the facts and figures and understand the language, as well as the procedures.

Finding a Good Sharebroker
Remember that a sharebroker is acting on your behalf, as well as on the behalf of the other party in the transaction. In other words, your sharebroker may not be totally impartial when advising you.

There are several reasons why a broker may feel an obligation to the company whose shares you are interested in:

  1. As listed companies are in business with sharebrokers, the company effectively is a client of the sharebroker. If the share broker, in the eyes of the company, does not show them support, he/she may lose the company as a client.

  2. If the sharebroker makes any unfair or derogatory comments in any newsletters about their client company, they run the risk of being sued for defamation.

  3. Sharebrokers depend on information from their client companies to present to their shareholder clients. Any uncomplimentary reports can result in information being restricted from the client company and this will affect their performance.

Most sharebrokers will steer a middle course because they don’t want to offend their client company and they don’t want to offend their clients.

The sharebroker’s income comes from a variety of fees and commissions charged, but they don’t make any money unless the transaction is completed. If this is the case, they are a type of salesperson needing to complete a sale or a deal before making any money.

This of course should not be the highest consideration, as far as a broker is concerned, but if they are depending on income from a transaction, the broker may be swayed one way.