What Is a Broker?

A broker is a licensed intermediary that buys and sells securities on your behalf and keeps the account those investments live in. Stock exchanges only accept orders from their members, so an individual investor cannot walk up and trade. The broker is the member that takes your order, routes it to the market or a market maker, confirms the fill, and records the resulting position. It also handles the plumbing most people never think about: settling trades, tracking your cost basis, issuing tax forms, processing dividends, and safeguarding the assets in your account.

The word broker is used two ways. A brokerage firm is the company that holds the license, such as Fidelity, Charles Schwab, or Robinhood. A stockbroker, historically, was an individual who placed trades for clients over the phone. Today most investors interact with a firm and its app rather than a single person, so the terms broker and brokerage are used interchangeably. Either way, the account they open for you is a brokerage account, the container that holds your cash and investments.

Brokers differ mainly in how much guidance you get and how much you pay for it. A full-service broker bundles execution with advice, financial planning, and a human relationship, and charges accordingly, often a percentage of the assets they manage. This suits people who want a professional to talk to and are willing to pay for it. A discount broker strips that back to low-cost, self-directed trading: you make the decisions and place the orders, and the firm provides the platform, research tools, and execution at little or no commission.

Online and app-based brokers are a modern flavor of the discount broker, built mobile-first around a simple interface, $0 commissions, and features like fractional shares that lowered the barrier for new investors. A robo-adviser is different again: instead of you picking investments, it builds and automatically manages a diversified portfolio for you based on a short risk questionnaire, typically for a small annual fee of around 0.25%. Many large firms now offer several of these under one roof, so the lines between them blur, but the core trade-off is always guidance versus cost.

For decades brokers charged a commission on every trade. That changed around 2019 when major US brokers cut stock and ETF commissions to zero, and free trading is now the norm. So how do they earn money? The most discussed source is payment for order flow: instead of sending your order straight to an exchange, the broker routes it to a wholesale market maker that executes it and pays the broker for that flow. It is legal, disclosed, and how several app brokers fund commission-free trading, though it draws debate about whether it affects your execution price.

That is far from the only stream. Brokers earn margin interest on money they lend investors to buy securities, and they earn interest on uninvested cash sitting in accounts, often the single biggest line item. They charge fees for premium data and tools, options and futures trading, account transfers, and specialty products. They may capture a small spread between buy and sell prices on certain assets, and they collect management fees on robo-advised and managed accounts. So zero commissions does not mean a broker works for free; the cost simply moved to places that are less visible on a trade confirmation.

US brokers operate inside a layered oversight system. The Securities and Exchange Commission (SEC) is the federal regulator that writes and enforces securities rules. FINRA, the Financial Industry Regulatory Authority, is the self-regulatory body that licenses brokers, examines firms, and disciplines bad actors. A legitimate US brokerage is registered with the SEC and is a FINRA member, and you can look up any firm or individual broker on FINRA's BrokerCheck before funding an account.

Protection of your assets comes from SIPC, the Securities Investor Protection Corporation. If a member brokerage fails and customer assets go missing, SIPC covers securities and cash up to $500,000 per customer, including a $250,000 limit for cash. This is the brokerage equivalent of how FDIC insurance works for bank deposits, with one crucial difference: SIPC protects you against the broker failing, not against your investments losing value. A stock that drops 50% is a market loss SIPC does not touch. Before funding any firm, confirm it is SEC-registered, a FINRA member, and a SIPC member.

The starting question is how hands-on you want to be. If you want to make your own decisions and keep costs low, an app or discount broker fits. If you want a professional to plan with and are comfortable paying for advice, a full-service broker fits. If you would rather not manage anything, a robo-adviser builds and maintains a portfolio for you. None of these is best in the abstract; the right one depends on your goals, how much you want to do yourself, and what you are willing to pay.

Once you know the style, the checklist is practical. Confirm the firm is SEC-registered and SIPC-insured. Compare the real costs, not just the headline $0 commissions: account minimums, margin rates, options fees, and any management or transfer fees. Check that it supports the account types you need (taxable, IRA, and so on) and the investments you care about. And weigh the things that are easy to overlook, like the quality of the app, research tools, and customer support. Walnut is not an investment adviser, so treat this as a set of factors to weigh, not a recommendation of any particular firm.

The pattern across the table is the same trade-off: more guidance costs more, more self-direction costs less. Costs and features are approximate as of early 2026 and vary by firm; verify current pricing and the exact services on each broker's own site before deciding. Many large firms span several of these categories, so you can often start self-directed and add advice later within the same account.

Walnut is not a broker. It does not hold your money, custody your securities, or execute trades itself. Instead it sits on top of the brokerage account you already have. Through a secure connection called SnapTrade, Walnut links to major US brokers and reads your real holdings, so the analysis is about what you actually own rather than a generic example. Your assets never leave your broker, and the broker remains the regulated, SIPC-insured firm that holds and executes.

What Walnut adds is a way to understand and act on that portfolio in plain language. You can ask, through Claude, ChatGPT, or a built-in assistant, how your positions are doing against the S&P 500, where your holdings overlap, and what a change would look like. It is read-only by default, and any order is routed to your own broker only after you approve it. You can connect your brokerage in a few clicks. Walnut is informational and is not an investment adviser; it helps you see and act on your own portfolio rather than telling you what to buy.

A broker is the licensed intermediary that executes your trades and holds your account, because you cannot trade on an exchange directly. The types range from full-service brokers that bundle advice, to discount and app brokers built for low-cost self-directed investing, to robo-advisers that automate the whole thing. Since commissions went to zero, brokers earn money mainly through payment for order flow, margin and cash interest, and various fees rather than per-trade charges.

When choosing one, match the style to how hands-on you want to be, confirm it is SEC-registered and SIPC-insured, and compare the costs that hide behind free trades. Whatever broker you land on, you can layer analysis on top of it: from a connected account you can study an ETF, look at an individual stock you hold, or explore a theme you want exposure to. Fees, features, and regulations change; treat the specifics here as a starting point and confirm current details before deciding.