A broker is an intermediary, middleman if you will, that arranges or otherwise organizes a transaction. Basically, it is someone with connections that helps buyers or sellers complete transactions that they would otherwise have a hard time doing.
Brokers can be found in most types of businesses. Typically, they work on a commission type basis. They will usually take a percentage of the selling price as their fee for making the arrangements.
Let’s take a look at some of the more common types of brokers and what they specialize in.
A customs broker works with importers and exporters to help them move goods in and out of the country. In the United States a customs broker most often operates on behalf of importers. They facilitate the clearance of goods arriving in the country through U.S. Customs as well as other government agencies such as FDA, EPA, Fish and Wildlife, and many others.
Customs brokers act as a liaison between importers and the government helping make the process much smoother and quicker. More often than not the importer rarely ever needs to deal directly with Customs as the broker handles all of the particulars.
Often freight forwarders also employ customs brokers, but brokers can also work on their own. A customs broker must have a license and permit to operate. To obtain their license they must pass a rigorous test, meet all of the basic requirements as laid out by Customs and Border Protection, and pass a background check. Of course there are fees that must be paid to obtain the license and permits as well.
If you are interested in becoming a licensed customs broker you may want to take a course such as this one by Customs Broker Geek.
A freight broker is someone that is licensed by the FMCSA to arrange the transport of goods. They do not have their own trucks and equipment, but rather connect the parties that do with those who need to transport freight. There are all different sizes of freight brokers. You can find everything from the one-man operation all the way up to a multi-billion dollar company.
The freight broker is responsible for hiring motor carriers that meet the FMCSA guidelines with regards to insurance, safety standards, and other operating guidelines. Margins are typically low and it is a highly competitive industry, but it is large in that in the United States millions of tons of cargo is transported across the country every day.
Insurance brokers specialize in different types of insurance ranging from health, home, auto, and life insurance. The requirements of this industry have changed drastically over the last 50 years. Fraught with fraud and misrepresentation the government has made legislation changes to protect consumers.
Today, most insurance brokers are regulated by the state governments. Most states require a license to operate. To obtain this license the broker must take a pre-licensing course and then pass an exam. An application fee must be paid and a background check is also completed. After one obtains their license there will typically be continuing education courses and seminars that they must keep up with to maintain their license.
Insurance brokers play a large role in helping small businesses find the appropriate insurance coverage for their facilities as well as find affordable health insurance coverage for the owners and employees.
Most people that have purchased a house have worked with mortgage brokers. They work as an intermediary for home buyers to find lenders that will allow them to purchase a home. A mortgage broker must be licensed through the NMLS to operate. Surprisingly 68% of all mortgages are financed through a mortgage broker. It is big business in the U.S. with more than 400,000 employees nationwide working at more than 50,000 businesses.
The rest of the loans are purchased direct through the lenders. However, as can be seen by these statistics banks would prefer to arrange their loans through the use of brokers. It helps them expand their reach and it doesn’t cost them anything. This is because the mortgage broker takes a percentage of the sale for their fee.
Perhaps the most well-known of all brokers is the Stock Broker. If someone just says they are a broker most people assume that they are a stock broker. Stock brokers buy and sell various types of securities on behalf of individuals and businesses. To become a stock broker typically the individual will attend college for a degree in finance or accounting. To operate they must pass the Series 7 exam and often the Series 63, or 66.
The industry is heavily regulated by the SEC which outlines rules that businesses and traders must follow. The likely reason that this type of broker is so well known is due to highly popular movies such as “Wall Street”, “Wolf of Wall Street”, “Boiler Room”, and many more. Our economies are highly tied to the stock market with shares of publicly traded industries being traded through the stock exchange. It is a tough industry but highly essential to our modern day economy.