What Is a Broker?

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The word “broker” can be tough to translate. What is a broker and what do they actually do?

We find out.

In essence

A broker is someone who arranges transactions between buyers and sellers. In other words, they bring buyers and sellers together.

Brokers are usually paid by commission, a percentage of the sale.

Some industries rely heavily on brokers, others not so much.

A broker is expected to have the tools and knowledge to locate, screen and match the right buyers and sellers.

To achieve this, brokers have long lists of connections, industry knowledge, processing experience and can offer fast solutions so that sellers, and especially buyers, don’t have to do the research and trial and error themselves.

A first-time boat buyer is a good example

To understand how a broker can assist, let’s look at a customer buying a boat for the first time.

Without a broker, the customer will have to research types of boats and capabilities and specifications and sellers who offer them and at what prices. They’ll have to research and arrange storage, possibly including trailers and marinas. Moreover, licensing, registration and legalities can be really challenging and complicated.

A broker will take care of all of this and more.

For example, brokers often provide registration forms and assist their clients in filling them out. They’ll also know the right boat sellers in order to get the right boat quickly and at a good price.

Sometimes, a broker’s seller connections may offer discounts bespoke to the broker. This means a lower price for the client buying the boat.

Broker Vs agent

Generally, an agent represents a company or the seller, similar to a sales representative.

A broker, on the other hand, typically represents the buyer.

It usually means that a broker must have more industry and product knowledge than an agent as brokers deal with all kinds of customers and purchases.

An agent only needs to know the products and services of the company they represent.

Furthermore, an agent typically focuses on getting the sale completed for their company, then ends their relationship with the customer. A broker’s goal is to get the best deal for the client.

This is a generalisation as it can differ between industries.

Brokers in finance

Stocks and shares

When people buy and sell stocks and shares, they often need to go through a broker. Many companies do not offer direct stock purchase options to consumers.

Some stock brokers aren’t even people. Online platforms allow consumers to buy and sell certain company shares all from a phone, without needing to meet anyone in person. They’ll just have to create an account and upload money they wish to invest.

Of course, the online “broker” platform will charge a fee per transaction.

Homes, cars and other assets

When seeking finance for houses, cars and other loans, brokers are pretty common and helpful.

They also work with commercial clients, like businesses looking for fleets of vehicles, factory upgrades and tools or machinery, etc.

A broker’s work covers many different types of clients and purchases.

Without a broker, there’s also risk to credit reports

A huge reason why so many people prefer to seek finance with the help of a broker is to save their credit report and credit score.

Typically, each time someone formally applies for finance, the enquiry is recorded on their credit report. These enquiries can lower a credit score.

A credit score “rates” or scores a person’s ability to repay a loan and the higher it is, the better.

In other words, formally applying to multiple lenders (or banks) to compare interest rates and loan amounts on offer can cause a credit score to drop, negating the value of comparing loan products.

Sometimes, a person might apply for a few loans in order to see numbers only to come back to the first one and be declined because their credit score has dropped after applying to others.

Brokers solve all this.

Being experts in their industry, a broker is able to “soft quote” the client without submitting a formal application, thus minimising enquiries on a credit file. They’ll also take necessary details like income and loan purpose and match the client to a lender without affecting a credit score or credit report.

Of course, we all know the ‘big four’ banks but there are dozens more lenders in Australia, each catering to different clients and circumstances.

It’s a broker’s job to find the best solution for their client, that means minimising the damage to credit reports as well as getting you what you want - without the stress and complications of doing it yourself.

Have a broker work for you

The team at Positive help thousands of Australians reach their financial goals and get the car, boat, business funding or whatever asset they’re looking for.

Using our quick quote tool allows you to see numbers matched to your circumstances.

Expect fast results and simplified finance.

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