As a financial expert with years of experience in the industry, I can provide a comprehensive understanding of how stockbrokers make their money. Stockbrokers are integral to the financial markets, acting as intermediaries between buyers and sellers of stocks and other securities. Their income can come from various sources, and here's a detailed look at the primary methods:


1. Commission-Based Earnings: This is the most traditional way stockbrokers earn money. They charge a commission on each trade executed on behalf of their clients. The commission rate can vary depending on the brokerage firm and the type of trade. Some firms offer flat-rate fees, while others may charge a percentage of the total transaction amount. It's important to note that the commission structure has evolved over time, with some brokers now offering commission-free trading, which can be subsidized by other revenue streams.


2. Wrap Fees: Some brokers offer comprehensive financial planning services for a fee, known as a wrap fee. This fee covers not only trading services but also advice on investment strategy, portfolio management, and other financial planning aspects. The wrap fee is typically a percentage of the assets managed, and brokers may split this fee with the brokerage firm.


3. Spread: The spread is the difference between the bid price (what buyers are willing to pay) and the ask price (what sellers are asking for) for a security. Brokers can profit from the spread by buying securities for clients at the bid price and selling them at the ask price, pocketing the difference.


4. Payment for Order Flow (PFOF): Brokers may receive payment from market makers or trading venues for directing client orders to them. This practice, known as payment for order flow, can be a significant source of revenue for brokers, although it has been subject to scrutiny due to potential conflicts of interest.


5. Soft Dollars: Brokers can receive non-cash compensation in the form of research reports, analytics tools, and other services. These are known as soft dollars and are typically provided by third-party vendors in exchange for directing trades through their platforms.


6. Advisory Fees: For clients seeking personalized investment advice, brokers can charge advisory fees. This can be a fixed fee or a percentage of the assets under management.

7.
Margin Interest: When clients trade on margin, they borrow money from the brokerage firm to purchase securities. The firm charges interest on this borrowed amount, which can be a source of revenue for the broker.

8.
Rebates: Brokers can also earn rebates from exchanges for providing liquidity to the market. This happens when a broker's client is on the opposite side of a trade from a market maker.

It's worth mentioning that the split of earnings between the broker and the firm can vary. The figure mentioned in the provided reference, where the majority of stockbrokers get about 35% of the commissions they charge, may not be universally accurate and can differ based on the firm's compensation structure and the broker's individual agreement.

Now, let's move on to the translation.

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Stockbrokers are employees of a brokerage firm. They are paid by their firm to increase revenue and sales. Many investors don't know that when they pay a commission or wrap fee, the broker and the firm split that. ... The majority of stockbrokers get about 35% of the commissions they charge you.Jul 31, 2013read more >>