Someone who provides professional financial planning advice. Stock broker is a bit of an old fashioned term - most brokers go by "Investment
Advisor" these days, as a good portfolio will include fixed income
securities as well as equities
, and a broker will often provide budget
ing & tax
planning advice as well.
Some brokers are active market traders as described above - and far from being random opinions, most use detailed technical analysis or extensive company and market research to make their recommendations. Other brokers use a buy and hold strategy, picking value stocks geared for long-term appreciation. In the short-term, stock markets are risky - but in the long term, they've always gone up. A well diversified portfolio consistent with your risk tolerence and goals isn't risking the farm - hiding your money under your mattress and being pummelled by inflation and retiring penniless is risking the farm.
Most brokers are paid by commission, it's true, but many offer a fee-for-service plan where they waive commissions and charge a small annual percentage of total assets - so tied to the growth of the portfolio, yes. The reason most brokers don't do this for every account is that it's usually cheaper for small investors to just pay commission unless they do a lot of trading.
There are, obviously, shady brokers - but the majority are honest businessmen and businesswomen. Do your homework when you're picking your broker - check with the Better Business Bureau, check with your local securities regulator - and you'll be just fine. Unless you have time to follow the markets all day and fairly sophisticated knowledge of all the options out there, a broker is a good investment - they watch the markets so you don't have to, and they have the expertise to make you more money than you could on your own.