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BROKER-DEALER

Definition 
A broker-dealer is any person or firm engaged in the business of buying and selling securities for the accounts of others or its own account. 

​Why It's Important
You may be thinking that is an expansive definition. Well, it is and for a good reason! A brokerage acts as a broker when it buys and sells for its customers and as a dealer when it buys and sells for itself. Broker-dealers can range from small, independent, boutique firms to subsidiaries of big banks and investment companies. There are over 3,700 broker-dealers in the US to choose from! 

The big three (as of October 2018) are:

  1. Fidelity Investments ($6.85 trillion under management)
  2. Charles Schwab ($1.85 trillion under management)
  3. Wells Fargo ($1.6 trillion under management)


One role of a broker-dealer is to underwrite (distribute) new securities for issuers. Broker-dealers are powerful entities and essential for the flow of the market! A lot of financial advisors work under a broker-dealer, which is why you may see a company you don't recognize on your investing statements.

A broker-dealer could either be a wirehouse (which sells its own products to the market) or an independent broker-dealer (which sells products from other sources).

If you have investment accounts, your homework this week is to find out who the broker-dealer is.

​*Hint: Check your latest statement*

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