Suppose you have a strong interest in entering the world of retail and want to learn everything that has to do with it. You likely want to know what a retail broker is in the first place, whether there are certain types, what is the difference between retail and dealers, and so on.
Sometimes many of these phrases, as well as their definitions, can seem confusing, especially to someone who has just stepped into this specific industry. Questions arise about what the role of a retail broker actually is and why you must understand it before you start your career in it.
Thus, in order to really achieve massive success in this field, it is imperative that you educate yourself first of all. Let’s start with the very definition of a retail broker, shall we?
Definition of retail broker – All essential information
A retail broker represents any person or a retail broker that acts on behalf of a customer intending to obtain an insurance policy or any other product form or through a Carrier, Wholesale Brokerage Business, or Underwriting Business.
In other words, a retail broker is a middleman between buyers and security sellers. Retail brokers must register with a self-regulatory organization, such as the Financial Regulatory Authority and the Securities and Exchange Commission.
Institutional brokers are those that are primarily working with institutional investors, while retail brokers are those that serve the needs of individual investors.
What is the prominent role of a retail broker?
Retail brokers are usually facilitating debt and equity trades for their clients. That also includes bonds and stocks. In addition to that, retail brokers might also sell additional securities and financial products such as:
- Limited partnerships
- Real estate investment trusts
- Mutual funds
In addition to that, retail brokers might also advise their clients on the following:
- Tax-advantaged products
- Planning for their children’s education
- Individual retirement accounts
- Managing their assets
What is the job description of a retail broker?
Once you’ve got to know what a retail broker is, it’s crucial to understand their job description. Sales agents licensed to sell securities and work for retail brokerage companies are known as stockbrokers, antiquated, or retail brokers. More gentile, it can also be “customer’s man or woman.” The official title, however, is “registered representative.”
Keep in mind that these financial professionals may be qualified or trained to give investment advice to their clients regarding particular types of securities. Nonetheless, the primary job of one retail broker remains to acquire, sell securities and customers to generate commissions for their company. Before being able to work as retail brokers, registered representatives have to be licensed. It involves passing both federally-mandated and state securities examinations.
The role of a retail investor and institutional investor explained
A retail investor is responsible for executing its trades through online or traditional brokerage firms and numerous other types of investment accounts. It’s essential to understand that retail investors buy securities for their personal funds and trade very often in significantly smaller amounts as compared to institutional investors.
An institutional investor represents an umbrella term for larger-scale investments made by fund and professional portfolio managers who are likely to manage a pension or a mutual fund. What is interesting is that retail investors have a considerable impact on market sentiment – the overall tone in financial markets.
What are institutional investors?
Institutional investors are considered to be the big players in the market that are responsible for money movement. So, here are some of the most common institutional investors:
- Mutual funds
- Pension funds
- Commercial trusts
- Insurance companies
- Hedge funds
- Money managers
- Private equity firms or investors
- Endowment funds for a college or university
These particular investors are considered to move large blocks of shares and significantly influence the stock market’s movements.
What is retail trading – A brief explanation
Those who aren’t still sure of what a retail trade represents are the business activity linked with the sale of goods to the final customer, which is the ultimate consumer. It’s the link between customers of the product and manufacturers or wholesalers.
In most cases, retail traders are selling goods to consumers in small quantities for the purpose of personal usage, not for business or resale purposes. Retail trade is able to take a lot of forms. It’s not required that goods be sold from a store. One retail trade is also able to happen via email, post, phone, door to door selling, etc.
However, one particular thing remains common in all the cases that we’ve mentioned above. It is that the buyer of the goods is what is called a “final consumer.” As far as this is the case, it will be considered as retail trade.
Online retail trading – Quick overview
When it comes to online retail trading, it’s evident that retail traders are the ones that purchase or sell securities for personal accounts, while institutional traders are trading larger sizes and more exotic products.
Therefore, online brokers and numerous other factors have narrowed the gap between institutional and retail traders, which once again gave institutional traders a significant advantage.
How can you make an online investment with a retail broker?
In order to make online investments like selling or purchasing stocks, it is essential that you find a good and reliable retail broker. These brokers are licensed for making trades with securities exchanges. Nonetheless, you are able to choose the amount of service and support you wish from your retail broker by picking either a full-service or a retail discount broker.
What are the best retail brokers in 2021?
Choosing the right broker has always been challenging, especially if we consider that there are many scam brokers online with flashy websites and unrealistic offers.
Therefore, it is more than essential to choose the right and quality retail broker for your business.
Here is the retail broker list of the best retail brokers in 2021 that we’ve provided for you, based on minimum deposit, spreads, trading platforms, and also user reviews.
Retail broker list – The best ones in 2021
- The Financial Investment Group
- FXCT Investments
- Profit Swiss
- CFD Advanced
- CTL Markets
- Nixse Review
- Crypto IFX