Definition of a Financial Product Broker

A financial product broker helps individuals reach investment goals.

A financial product broker, also called financial broker or brokerage company, is a corporation that helps clients reach their investment goals. A product broker is also a financial intermediary that helps buyers and sellers of securities (financial products) trade on capital markets. A brokerage company may be regulated by domestic or international overseers.

Definition

A product broker is a financial institution that provides financial market access to clients. A brokerage company also helps individuals and organizations reach their short-term investment goals or have sufficient funds to finance long-term activities. Examples of product brokers include insurance companies, mutual funds, investment banks and pension funds. For instance, a California-based multinational insurance company that provides financial planning advice or recommends securities to local clients is a financial product broker.

Function

A financial brokerage firm has two primary functions--provide financial advice to clients and help them trade on securities exchanges. Assume the California-based insurance firm wants to increase its market share in the states of New York, Colorado and Florida. The company may ask its financial product sales associates to review clients' financial data, employment information and investment goals and then recommend appropriate stocks or bonds for their portfolios. Alternatively, the firm may offer brokerage accounts to clients who want to buy and sell securities.

Significance

A financial brokerage plays a pivotal role in modern economies. The brokerage industry supports the economy and financial markets by providing market access to individual traders. Without a broker, an individual investor may be unable to participate directly in financial markets' activities and may have to pay substantial trading commissions. Financial brokers also increase financial literacy in the population by helping clients review their financial data and providing appropriate investment ideas.

Regulations

Financial product brokerage activities are regulated by various government agencies and industry overseers. If the California-based insurer wants to operate in the United States, it may need to abide by rules promulgated by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Agency (FINRA), the Commodities Futures Trading Commission (CFTC) or the National Association of Securities Dealers Automated Quotations (NASDAQ). Internationally, the company may have to conform to the International Swaps and Derivatives Association (ISDA) agreements.

Job Opportunities

Financial product brokerage jobs typically depend on the state of the economy, staffing needs and stock market performance. Positions within the industry are also driven by applicants' academic and professional credentials. A brokerage job usually requires a four-year college degree, although business majors are more frequent than liberal arts backgrounds. The Bureau of Labor Statistics reports that median wages of financial product broker agents were $68,680 in 2008. The same government data indicates that median wages of financial analysts were $73,150 in 2008.

References

• Securities and Exchange Commission: Protect Your Money: Check Out Brokers and Investment Advisers
• FINRA: About the Financial Industry Regulatory Authority
• Investopedia: Discount Broker
• Bureau of Labor Statistics: Financial Analysts
• Bureau of Labor Statistics: Securities, Commodities, and Financial Services Sales Agents