The goal of any investor is to get maximum profit from his/her investment. But most of the investors are not fully aware about the procedure for the type of business where they are going to invest. For this purpose, they need to consult professionals that are aware about the market situation and chances of future growth of any investment.
But whenever new investors came in market, they don’t exactly know about the right types of professionals they are required to deal with. The situation becomes more complex when two or more types of professionals in a field have nearly similar type of responsibilities and duties. This makes it difficult for commoners or newly entered investors to differentiate between them. One such difficult situation arises for investors when they invest in stock market.
In this condition, they usually get confused about dealing with stockbrokers and investment managers. They consider both perform same type of function which is a mistake. In fact, there is a clear difference between stockbrokers and investment managers and it is necessary to know this difference before investing in the field. Even proper knowledge about working of both (stockbrokers and investment managers) will make you understand main difference between the two. It will also help you as an investor to select right type of professional according to your requirement.
Stockbroker is a professional person linked to a brokerage firm. His duties include buying and selling of stocks and other securities (bonds, futures etc.) for his clients through stock exchange. In return of his services, he receives either a fee or commission. This fee is fixed and doesn’t depend on profit or loss of shares.
The biggest advantage of stockbrokers is the control they provide to investors. These brokers provide information about market situation in stock exchange and advice about buying or selling of shares. But they don’t do so on their own. The investors are completely in control of this process and they can choose whether to act upon the advice of stockbroker or not? It is the reason that stockbrokers are not responsible for end result and will receive their fee or commission in either case (profit or loss).
On the other hand, you can invest in investment management firmswhere investment managers make decision on their own. You will receive profit for your investment but you will not be included on the process of decision making for your investment. They will decide whether PRO service companies in Dubai or solar plant companies in Sydney are best for you. It will be on the sole discretion of investment manager to choose right type of business for our investment.
After knowing about the working of stockbrokers and investment managers, we find following main differences between them:
- Stockbrokers provide complete information about the market situation to their clients and act according to the decision taken by these clients. It means there is complete control of investors to decide about their investment. It is not the case with investment managers as they invest capital of their client according to their own understanding of market. It means investors can’t decide on their own about their investment and they have to rely on expertise of investment manager.
- Another important difference between investment managers and stockbrokers is that investment management firms make a complete record of the strategies they used. This type of detailed track record is not maintained by stockbrokers.
After knowing these main differences, you can choose either stockbrokers or investment managers according to your requirement. If you want to get financial advice and remain in control of your investment, then stockbrokers are best for you. Investment managers will suit you if you know the risk and want to use the track record of your investment to understand working of investment managers.
Mona is a content writer in a Dubai-based consultancy firm, Riz & Mona Consultancy and with experience of more than 6 years. During her content writing career, she has acquired lot of experience in writing for various subjects related to business and investment including investment management, small business, trade, finance, taxation, and others.