What goes on in a brokerage ?Are brokers choosing people's stocks for them?

Question

How do people know that the broker will choose good stocks?

What other kinds of services do they offer?

Answer 1

it is illegal for your broker to just invest your money wherever they want.  brokers are not money managers, so they don't have any say in where your money goes.  the broker just helps do all of the transactions associated with investing.

what brokers can do is try to communicate a sales pitch from their sell-side people recommending a particular investment.  so when you call them, they might suggest that you sell your company XYZ stock and use that money to buy some ABC company stock.  but they can't do anything without your approval.  it's your money, and you always have the final say.

Answer 2

There are many things going on in brokerage firms.  Firms will prepare investment recommendations for their clients and those of for managed accounts, they will do corporate financing and underwriting participation, many are in the business of lending securities; many act as dealers in bond transactions; some are market makers in equitiy and/or option securities; the may be proprietary trading in both equities and bonds; some have research departments for internal and street use; and there those that have floor operations.

The sales reps themselves do not usually choose the particular investments for the clients, although they can, but the firms supplies them with prepared research.

Many brokers have years of market experience and spend most of their day reading material that keeps them current with the market an the various product.