are stock brokers necessary? Essential guide

Are stock brokers necessary?

If you are asking "are stock brokers necessary" to buy or sell shares, this article gives a clear, practical answer within the first read. You will learn what a broker is, why retail investors usually open brokerage accounts, what alternatives exist (including crypto options on Bitget), and how to decide whether a human broker, an online brokerage, or a brokerless path fits your goals.

As of 2026-01-15, according to SEC and FINRA publications, most U.S. retail market access still occurs through registered broker-dealers and regulated online brokerages. This guide stays factual and beginner-friendly, noting protections such as SIPC coverage (up to $500,000, including $250,000 in cash) and common practices around custody and order execution.

What you'll get from this guide: a plain-language definition of stock brokers, historical and modern roles, types of services, cost and regulatory issues, alternatives (DSPPs, funds, robo-advisors, crypto exchanges and non-custodial options), steps to buy without a traditional broker, and practical selection criteria.

Definition and scope

A "stock broker" generally refers to either an individual licensed to effect securities transactions for clients or to the brokerage firm (broker-dealer) that executes trades and holds accounts. The phrase "are stock brokers necessary" centers on whether you need one of these licensed intermediaries to trade equities.

Key distinctions:

• Licensed broker (individual): a person registered with regulators (in the U.S., FINRA) who can give advice and place trades for clients.
• Brokerage firm / broker-dealer: the company that registers as a market intermediary, maintains custody of assets, executes and clears trades, and provides account services.
• Brokerage platform: the software or service (web/app) where users place orders. It can be full-service, discount, or execution-only.
• Robo-advisor: an automated service that builds and manages a portfolio using algorithms.
• Exchange: an organized marketplace (e.g., U.S. stock exchanges) where securities are listed and traded.
• Crypto exchange: a platform for digital assets; some crypto platforms combine exchange and broker-like functions and can act as custodians.

Throughout this article we compare these roles and explain whether, and when, the answer to "are stock brokers necessary" is yes or no for different investors.

Historical role of stock brokers

Traditionally, stock brokers served as essential intermediaries between investors and the exchange. Their functions included:

• Market access: brokers provided membership or access to exchanges where listed securities trade.
• Order execution: taking client instructions and routing orders to the appropriate venue for execution.
• Settlement and clearing: ensuring the buyer receives shares and the seller receives funds through clearinghouses.
• Custody and safekeeping: holding securities on behalf of clients and maintaining records.
• Recordkeeping and reporting: providing statements, trade confirmations, and tax documents.
• Advisory services: offering research, recommendations, and discretionary portfolio management for clients.

Historically, an ordinary investor could not directly access exchange order books; brokers were the gateway. Over time, technology and regulation transformed this model, lowering costs and changing who performs each function.

Types of brokers and brokerage services

Full-service brokers

Full-service brokers provide a broad set of services: personalized financial advice, portfolio construction, access to research, tax and estate planning coordination, and often discretionary portfolio management. They typically help clients with complex needs and may offer dedicated relationship managers.

Typical fee structures:

• Commissions per trade (less common today for U.S. equities).
• Advisory or management fees expressed as an annual percentage of assets under management (AUM), often 0.5%–2% for personalized services.
• Account minimums for managed accounts, which can range widely depending on the firm.

When investors wonder "are stock brokers necessary" because they want human advice for complex planning, full-service brokers are the traditional answer.

Discount and online brokers

Discount brokers focus on lower costs and self-directed trading. They provide the trading platform, market access, and custody, but minimal personalized advice. Since 2019, many U.S. online brokers adopted $0 commissions for standard stock and ETF trades, making access broadly inexpensive.

Discount platforms earn revenue through other channels (see "Costs, execution, and hidden fees"). For many retail investors asking "are stock brokers necessary?" the practical answer is that a low-cost online broker gives you access without paying for full-service advice.

Robo-advisors and automated platforms

Robo-advisors use algorithms to build diversified portfolios based on investor inputs (risk tolerance, goals, timeframe). They handle rebalancing and sometimes tax-loss harvesting automatically.

Tradeoffs:

• Lower fees than human advisers (often 0.25%–0.50% AUM).
• Less personalization and limited guidance on non-investment financial planning.
• Good fit for investors who prefer passive, hands-off strategies.

Robo-advisors effectively answer "are stock brokers necessary" for a large subset of retail investors who want automated management rather than human brokers.

Brokerages that act as custodians vs. execution-only platforms

Some brokerages combine order execution with custody: they hold your securities in accounts, maintain records, and may offer cash sweep services (placing uninvested cash into HISA or money-market vehicles). Other platforms are execution-only: they simply route orders and leave custody to another custodian.

Important practices:

• Custody model affects counterparty risk and protections (SIPC coverage in the U.S. applies to many broker-dealers acting as custodians).
• Cash sweep can generate yields on idle cash but may expose cash to the terms of the sweep vehicle.

When considering "are stock brokers necessary", understand whether your chosen provider will hold your assets (custodian) or only facilitate trades.

Do you need a broker to buy stocks? (U.S. equities and similar markets)

Short answer: Yes for access to organized exchanges, but not necessarily a human broker. Retail investors generally cannot directly place trades on major exchanges; they need an account with a registered broker-dealer or a platform that provides market access.

Details:

• Practical reality: most retail orders route through brokerages (online or full-service) which are members or have access pathways to exchanges and clearinghouses.
• No human required: modern online brokerages and robo-advisors let you place orders and manage portfolios without speaking to a human broker.
• Exceptions: direct stock purchase plans (DSPPs), dividend reinvestment plans (DRIPs), some private secondary market transfers, and certain employee stock plan transactions can allow purchases without a retail broker.

If your question "are stock brokers necessary" assumes a human broker and high fees, the modern reply is that a human stock broker is not necessary for most retail investors, but a brokerage account—managed by a regulated broker-dealer—is still the common access point.

Alternatives to using a traditional stock broker

Below are common alternatives that let investors gain exposure or transact without a traditional human broker.

Direct stock purchase plans and dividend reinvestment plans (DRIPs)

DSPPs allow investors to buy shares directly from an issuer or a transfer agent, often with low or no commissions. DRIPs automatically reinvest dividends into additional company shares.

Notes:

• Not all companies offer DSPPs/DRIPs.
• These plans can be convenient for buy-and-hold investors but may have limited liquidity or transfer steps when you want to sell.

Mutual funds and ETFs

Buying fund shares (mutual funds, index funds, ETFs) gives exposure to diversified baskets of stocks without purchasing individual shares. Funds are available via broker platforms, retirement plans, and sometimes directly from fund companies.

Advantages:

• Instant diversification.
• Professional management or passive indexing.
• ETFs trade intraday on exchanges via brokers; many platforms offer commission-free ETF trading.

Robo-advisors and wealth managers

As covered earlier, robo-advisors provide automated portfolio creation and trading without a traditional human broker. They maintain brokerage relationships behind the scenes and execute trades on your behalf.

Cryptocurrency exchanges and decentralized exchanges (for crypto assets)

For crypto tokens and tokenized securities the market access model differs:

• Centralized crypto exchanges (including Bitget) act as custodial trading venues and provide broker-like services: order matching, custody, and often derivatives and staking.
• Decentralized exchanges (DEXs) let users trade peer-to-peer using non-custodial wallets and smart contracts; users retain private keys but take on custody risk.

Many retail investors treating digital tokens as alternative assets ask "are stock brokers necessary" in the crypto context; the short answer is no—crypto has its own access layers (CEX/DEX), but some crypto platforms offer broker-dealer services for tokenized securities.

Note: For crypto, Bitget offers exchange services and custody options; for self-custody, Bitget Wallet is a recommended option to manage private keys securely.

Peer-to-peer and private market platforms

Specialized venues for private company shares or secondary transactions (e.g., private-placement platforms) may bypass retail brokers but typically require accreditation, KYC, and specific transfer agents or custodians.

Regulatory and legal considerations

Regulation matters when answering "are stock brokers necessary" because regulated intermediaries provide market permissions and investor protections.

Key points:

• Broker-dealer registration: In the U.S., firms that execute securities trades for others must register with the SEC and be members of FINRA. Futures and certain derivatives fall under the CFTC/NFA.
• Suitability and standards: Brokers owe suitability obligations and many advisors owe higher fiduciary duties (depending on their registration). The SEC's Regulation Best Interest (Reg BI) sets standards for broker recommendations to retail clients.
• Investor protection: In securities markets, SIPC protects customer cash and securities against a broker-dealer's failure up to statutory limits (commonly $500,000 including $250,000 in cash). SIPC does not protect against investment losses.
• AML/KYC: Anti-money-laundering (AML) and Know Your Customer (KYC) rules apply across broker-dealers, many exchanges, and large trading platforms.

Regulatory environments differ by jurisdiction. When weighing "are stock brokers necessary", consider whether the provider is properly registered and what legal protections apply.

Costs, execution, and hidden fees

Cost structures vary and influence whether a broker is necessary or whether a low-cost alternative suffices.

Explicit costs:

• Commissions: Per-trade charges (many U.S. brokers now offer $0 commissions for stock/ETF trades).
• Advisory fees: Percentage of AUM for managed solutions.
• Account fees: Inactivity, account maintenance, or transfer fees in some firms.

Implicit or hidden costs:

• Bid-ask spreads: The difference between buy and sell prices paid by traders.
• Payment for order flow (PFOF): Some brokers route orders to third-party market makers that pay for order flow; this practice can create conflicts affecting execution quality.
• Interest on uninvested cash: Brokers may earn interest on idle cash via sweep programs or use that cash in ways that generate income for the broker.
• Margin interest: Cost of borrowed funds when trading on margin.

Execution quality is not measured solely by fees. Lower nominal commissions do not guarantee better execution; order routing, liquidity, and execution speed matter.

Benefits of using a broker

Using a broker (human or platform) can provide:

• Market access: Ability to trade listed securities and receive trade confirmations and settlement.
• Professional advice and research: For those who need financial planning or stock recommendations.
• Trade execution and settlement: Reliable processing, custodial safekeeping, and recordkeeping.
• Tax reporting: Consolidated 1099s (or local equivalents) and assistance for tax-related queries.
• Advanced services: Margin lending, complex options trading, and specialized order types.

When asking "are stock brokers necessary", these benefits help justify the use of a broker for investors who value the above services.

Drawbacks and conflicts of interest

Potential negatives of using brokers include:

• Costs: Fees and commissions (or hidden revenue sources) reduce net returns.
• Conflicts of interest: Payment for order flow, proprietary trading, or incentive structures can misalign broker and client interests.
• Overtrading risk: Incentives or ease of trading may encourage excessive activity.
• Advice quality: Not all recommendations are impartial; investors must verify credentials and disclosures.

Understanding these drawbacks informs whether a broker is necessary versus a cheaper, more transparent alternative.

When a broker is likely necessary or beneficial

Situations where a human broker or a full advisory service is helpful:

• High net worth individuals with complex tax, estate, or cross-border needs.
• Investors requiring customized financial planning or discretionary portfolio management.
• Active traders or professionals needing advanced execution tools and institutional-grade services.
• Complex securities (private placements, structured products) that require broker-dealer distribution.

When DIY or low-cost platforms are sufficient:

• Beginners learning investing with long-term passive strategies.
• Investors focused on low-cost index investing via ETFs or mutual funds.
• Those who prefer automated rebalancing and tax-loss harvesting via robo-advisors.

Answering "are stock brokers necessary" depends on investor complexity, required services, and willingness to self-educate.

How to choose a brokerage or decide to go brokerless

Key factors to compare

• Fees and commissions: Examine explicit fees and implicit revenue sources.
• Execution quality: Some platforms publish execution statistics; compare average spreads and fill quality where available.
• Product availability: Stocks, options, mutual funds, ETFs, crypto, and access to international markets.
• Regulatory protections: Registration, SIPC or local equivalents, and capital adequacy of the broker.
• Custody model: Who holds your assets? Are securities registered in your name or street-name?
• Account types and minimums: IRA/retirement accounts, taxable accounts, margin availability.
• Customer support and dispute processes.
• Platform usability, research tools, and educational resources.

Due diligence steps

• Verify registrations: Check with SEC/FINRA or your local regulator to confirm a broker-dealer’s status.
• Read disclosures: Review Form CRS, fee schedules, and privacy statements.
• Compare order routing/execution practices: Look for transparency on payment for order flow and market makers.
• Understand custody and cash sweep policies: Where is your cash parked and how is it protected?

These checks help you answer "are stock brokers necessary" in a way that matches safety and service expectations.

Special considerations for cryptocurrencies

Crypto markets operate differently from traditional equity markets, which affects the applicability of the question "are stock brokers necessary." Key differences:

• Market structure: Centralized crypto exchanges (like Bitget) provide custodial trading venues; decentralized exchanges (DEXs) operate via smart contracts and non-custodial wallets.
• Custody risk: With non-custodial wallets you control private keys (self-custody) and are responsible for protection; custodial platforms hold keys but introduce counterparty risk.
• Regulatory uncertainty: Jurisdictional rules on crypto custody, tokenized securities, and on-ramps vary.
• Tokenized securities: Some digital assets are tokenized forms of securities and may require licensed intermediaries to trade legally.

Bitget and Bitget Wallet note: For retail users seeking broker-like crypto services, Bitget acts as an exchange and provides custodial solutions and trading tools; for self-custody, Bitget Wallet supports user-managed private keys and on-chain trading.

Practical steps to buy without a traditional broker

If you decide to go brokerless or minimize broker dependence, here are clear steps:

1. Open an online brokerage or robo-advisor account: Many platforms allow full online onboarding with KYC and bank linking.
2. Use DSPPs/DRIPs: If the issuer offers them, enroll to buy direct or reinvest dividends.
3. Buy fund shares: Purchase mutual funds or ETFs via fund companies or investment platforms.
4. Use a robo-advisor: Let the automated service buy and manage funds on your behalf.
5. For crypto: Create an account on a regulated exchange (e.g., Bitget) for custody-based trading, or use Bitget Wallet or another non-custodial wallet and interact with decentralized exchanges for peer-to-peer trading.

Practical note: even "brokerless" routes usually involve regulated intermediaries behind the scenes (custodians, transfer agents) — the difference is whether you interact directly with a human broker.

Risks and investor protections when not using a full-service broker

When avoiding full-service brokers, you trade away some services and protections:

• Custody and counterparty risk: Non-regulated platforms or certain custodial arrangements can increase loss risk if the platform fails or is hacked.
• Lack of personalized advice: You may miss tailored planning for taxes, retirement, or complex situations.
• Errors in self-directed trading: Mistyped orders or failure to understand complex instruments (options, margin) can be costly.
• Scams and unregulated platforms: Unverified exchanges and OTC sellers can present fraud risk.
• Limited recourse: Unregulated platforms may offer little legal remedy.

Mitigation strategies: choose regulated platforms, verify registrations, use strong security (2FA, hardware wallets for self-custody), and educate yourself on the instruments you trade.

Frequently asked questions

Q: Can I trade without a broker? A: You can avoid a human broker, but accessing most organized markets typically requires an account with a regulated intermediary or platform. Exceptions include DSPPs, some private transactions, and direct on-chain crypto trades.

Q: Is a broker the same as an advisor? A: Not necessarily. A broker executes trades and may be obligated to ensure suitability. An advisor (registered investment adviser) often has a fiduciary duty to act in your best interest. Roles and standards differ by registration and service model.

Q: Are online brokers safe? A: Many regulated online brokers offer strong protections (registration, SIPC coverage in the U.S.). Safety depends on regulatory status, custody practices, and platform security. Verify registration and read disclosures.

Q: How do brokers make money? A: Through explicit fees (commissions, advisory fees), interest on cash, margin interest, payment for order flow, securities lending, and account or service fees.

Q: How does investing in crypto differ? A: Crypto trading often uses exchanges and wallets rather than traditional broker-dealers. Custody models differ (self-custody vs. custodial exchanges), and regulatory treatment can be less settled depending on jurisdiction.

Summary and practical guidance

To directly answer the repeated question: are stock brokers necessary? For access to organized equity markets you generally need a brokerage account, but that does not require a human, full-service broker. Modern options include online brokers, robo-advisors, DSPPs, and funds. For crypto and tokenized assets, access uses exchanges (custodial) or non-custodial wallets and DEXs.

Choose based on your needs:

• If you need personalized advice, tax planning, or complex services, a full-service broker or registered advisor can be appropriate.
• If you are cost-sensitive, prefer DIY investing, or follow passive strategies, discount brokers, robo-advisors, or funds may suffice.
• For crypto exposure, consider a regulated exchange and strong custody practices; Bitget provides exchange services and Bitget Wallet supports non-custodial management.

Final practical steps:

• Verify provider registrations and protections (e.g., SIPC where applicable).
• Compare total costs, execution quality, and custody arrangements.
• Start small if self-directed and use educational resources to build knowledge.

Explore Bitget features: to trade digital assets with custody or self-custody options, consider reviewing Bitget’s exchange services and Bitget Wallet to match custody preferences and risk tolerance.

References and further reading

• U.S. Securities and Exchange Commission (SEC) materials on broker-dealers and investor protections. As of 2026-01-15, SEC guidance remains a primary source for broker regulation.
• Financial Industry Regulatory Authority (FINRA) information on broker registration and investor alerts. As of 2026-01-15, FINRA materials outline suitability and disclosure rules.
• SIPC summary on customer protection limits: coverage up to $500,000 including $250,000 cash.
• Consumer finance and educational publishers (Investopedia, major consumer guides) for primers on DSPPs, ETFs, and broker fee structures.

Sources noted above provide regulatory context and are suitable starting points for up-to-date details and broker disclosures. Always consult the provider’s current documentation before opening accounts.

Further exploration: If you want a checklist to pick a broker, or a beginner’s walkthrough to open a brokerage account or start with Bitget Wallet, say "Show me the checklist" and I will provide step-by-step guidance.