The whole truth about the stock broker . A novice investor or trader who wants to buy stocks, bonds and other financial assets should understand that he needs a brokerage account. You can’t just come to the exchange office and buy assets there. There must be an intermediary between the exchange and the buyer.
- Intermediary between the exchange and the trader/investor
- How to choose a broker – important criteria other than a license
- What does a broker do?
- Opens accounts
- Manages accounts
- Fulfills orders
- Informs about the course of the auction
- Provides reports
- Pays taxes to the government
- Replenishes and credits funds
- How to open a brokerage account?
- How to work with a broker?
- What to do if the broker goes bankrupt
- As a result
Intermediary between the exchange and the trader/investor
An intermediary is a person or company that is between the buyer of the asset and the owner. If an investor decides to buy the company’s assets, he does not come to the owner, but goes to the stock exchange and makes a purchase. There are two types of intermediaries:
- Manager – this can be one person or a company that searches for financial instruments, analyzes and buys. This method is suitable for those who want to invest, but do not want to spend a lot of time choosing and analyzing financial instruments.
- A broker is a company that operates on behalf of an investor, buys assets and holds them in a depository. This method is suitable for people who want to make an independent investment of money. In this case, the investor gives an order to purchase the selected assets, and the broker executes.
Important: The broker and manager must be registered in Russia and have a license to carry out activities issued by the Central Bank, check for a license:
https://www.cbr.ru/securities_market/registries/ .
Forex Brokers with a license Other companies offering their investment services are scammers. Working with such a company, you can lose all your funds. In order to check the company, you need to go to the website of the Moscow Exchange, it is best to choose a broker from the top ten.
How to choose a broker – important criteria other than a license
There are three main criteria:
- Reliability – in order to evaluate it, there are ratings of brokers. There are two key rating agencies in Russia: Expert RA and NRA (National Rating Agency). In addition, you can evaluate the reliability by looking at statistics on the number of open accounts and active clients, the number of open individual investment accounts that are available on the website of the Moscow Exchange. It is also worth considering that there are banking divisions engaged in brokerage activities and companies that are engaged only in the brokerage business, many of them become banks.
Important: The data is contradictory, one broker has a large number of registered clients, but few active accounts and vice versa.
The purchased financial instruments are stored in the broker’s depository and in case of bankruptcy, the investor will not be returned the money, it is also impossible to receive compensation from the Deposit Insurance Agency, in order to return the assets, you will need to contact the depository where the broker kept the securities and transfer them to another brokerage account. Rating of brokers in Russia by the number of clients at the end of 2021-beginning of 2022:
- Convenience and accessibility – it is understood that the broker has a mobile application and a personal account in a computer browser. A good broker will provide all the necessary functionality, organize work without failures and freezes.
- Benefit – Included in this item are: transaction fees or trading fees and service fees. Brokers earn on commissions and the more transactions an investor makes, the more profitable it is. Each broker has its own commission and is little different from the other. Account maintenance is more important and can eat up a significant share of the capital, in order to find out the conditions and amount of account maintenance, you need to read the tariffs before opening a brokerage account with a particular broker.
https://www.banki.ru/investment/brokers/
Important: Some brokers may not charge
brokerage fees under certain conditions, such as brokerage account turnover or a certain amount in the account at which a minimum fee is charged.
What does a broker do?
The broker performs many functions, including: opening and maintaining an account, executing client orders, informing about trades, providing reports on completed transactions, accruing dividends and coupons, and withholding taxes.
Opens accounts
A person who wants to invest opens a brokerage account where money is kept for the purchase of financial instruments, a depository account is automatically opened for him where securities are kept.
Manages accounts
A client buying assets must transfer money to the owner through a broker who transfers money to the exchange, and the exchange transfers the assets to the broker and the client receives them and vice versa when selling assets.
Fulfills orders
When an investor decides to buy or sell an asset, he passes the order to the broker, who executes the required according to the submitted orders.
Important: The broker cannot sell or buy assets on his own, this is done by the manager.
Informs about the course of the auction
In a personal account or mobile application, the client sees the current price for each asset, the number of which depends on the broker. Analytics, news, ideas and other data may also be provided for the convenience of the client.
Provides reports
Each client transaction is recorded and, upon request or automatically, a report is provided on the transactions performed: what asset was bought, how much was bought and paid, commission and profit or loss from transactions.
Pays taxes to the government
Receiving profit from transactions, the investor is obliged to pay income tax of 13%. To simplify the work of the investor, the broker independently calculates the profit and pays the tax.
Important: Each broker chooses the time for paying taxes, monthly, annually.
Replenishes and credits funds
The broker performs a transfer from a bank account to his own and vice versa when withdrawing funds. It is not possible to withdraw the amount invested in financial instruments. Who is a broker in simple terms, what does it do, functions and what services does a brokerage company provide on the exchange market: https://youtu.be/LTWBYDL5mnk
How to open a brokerage account?
After evaluating and choosing a broker, it remains to open an account. Many companies have simplified the opening procedure and do it remotely, in a few minutes. Tinkoff offers to open a brokerage account in 5 minutes and in a few steps (
https://www.tinkoff.ru/invest ):
https://www.sberbank.ru/ru/person/investments/broker_service/onboarding ):
https://open-broker.ru/invest/open-account/):
Important: By filling out the questionnaire and sending the data to the broker, the client agrees to the terms of the contract, which must be studied in order not to encounter problems and misunderstandings in the future.
How to work with a broker?
After the passed stages, interaction with the broker begins. If the company issues additional software (
terminal ), then it should be installed following the instructions. After that, the account is replenished and work begins, the investor selects the desired financial instrument, sends an order to buy or sell an asset, the broker executes it by debiting money from the account. Financial instruments, analytics from the company, news, advice and training may be available in your personal account.
- Education is diverse : webinars, interactive, web courses, etc. Usually these are small lessons with the basics of investing, which describe the principles of investing, teach how to use a terminal or a mobile application.
- Analytics . It may be from the company and from leading foreign banks, the content is different, there may be entire articles explaining the reasons for the purchase or future changes in the company that will affect the growth in asset prices.
- Ideas . Bank analysts put forward relevant ideas for asset purchases.
- News . Articles allow you to find out information about a particular company or what is happening in the financial world.
What to do if the broker goes bankrupt
It is impossible to protect yourself from force majeure circumstances, the broker with which the investor works may go bankrupt or his license may be taken away. And the client needs to understand that he is partially protected by the law “On the Securities Market”. It all depends on the type of organization:
- Banking division – in this situation, the money is not divided into customers (depositors, investors, and others), they are in a common “heap” and in order to return your own, you will need to wait for the bankruptcy procedure to be completed and join the queue of victims, most likely they will issue large debts first, and then they will begin to return the client’s money. They return from the total amount, i.e. no matter what amount is in the brokerage account, the rest will be divided among everyone.
- A separate structure – the money on the brokerage account will be divided between clients, without waiting for the bankruptcy procedure, if the broker did not use the funds for personal transactions.
Important: it is important for customers who are served in banking departments to know that the funds on the brokerage account are used by the bank and this is legal.
How to become a stock broker, what is needed for this and is it possible privately: https://youtu.be/rbMjkC1T1NM
As a result
| How to choose a broker? | |
| Go to the website of the Bank of Russia | Read rates and contract |
| Select the first 5-10 companies | Evaluate convenience and functionality |
| Check rating in RA expert and NRA | Make sure you have the right financial instruments |
The choice of a broker will affect the further work of the trader/investor, in order to avoid delays and inconvenience, you will need to collect information on the Internet, check ratings, evaluate the convenience and benefits of using the services of a broker, read the tariffs and the contract. It is equally important to evaluate the quality of the services provided, which exchanges it gives access to and how many financial instruments it provides, how it processes requests in the support service. Fortunately for the investor, YouTube videos are available with information about each broker, reviews of work. After watching the video, it remains to be convinced of what has been said by checking the information provided on the Internet yourself. The sources are trusted sites, forums (here you need to be vigilant and not believe every word), news publications, often they have a tab about the financial world.
