What Is a Broker?
A broker is the intermediary, or platform, you use to buy and sell securities such as stocks and ETFs on the stock exchange. To invest, you need a securities account (a brokerage account) with a broker — it executes your orders and holds your securities for you. We explain the types of broker (neobroker, classic online broker, branch bank), the costs involved, how safe your money is, and how to choose the right broker for your needs.
What is a broker — simply explained
A broker is the intermediary between you and the stock exchange. It provides the platform you use to buy and sell securities — stocks, ETFs, bonds or funds. Retail investors cannot trade directly on an exchange; they need an authorised intermediary to do it. That intermediary is the broker.
To get started, you open a securities account (often called a brokerage account or, in Germany, a „Depot”) with a broker. This account holds your securities; it comes with a settlement (cash) account that funds your purchases and receives your sale proceeds. When you place an order, the broker routes it to the exchange and executes the buy or sell on your behalf.
What types of broker are there?
Brokers broadly fall into three types, which differ mainly in cost, feature set and advice:
- Neobroker: app-first and very cheap, often with free savings plans and tiny order fees (e.g. Trade Republic, Scalable Capital). Ideal for beginners and ETF savings plans.
- Classic online broker: a larger feature set, more exchanges and asset classes, somewhat higher fees — for more active or demanding investors.
- Branch bank: offers in-person advice at a branch, but is usually significantly more expensive on order and custody fees.
Neobroker vs. online broker vs. branch bank
| Feature | Neobroker | Online broker | Branch bank |
|---|---|---|---|
| Cost | very low | medium | high |
| Savings plan | often free | cheap | expensive |
| Feature set | lean | broad | broad |
| Advice | none | usually none | in person |
| Who it’s for | beginners, savings plan | active investors | advice-seekers |
What does a broker cost?
Fees decide your net return. These are the items to compare:
- Order (commission) fees: the charge per buy or sell — often just one or a few euros at neobrokers, much higher at branch banks.
- Spread: the gap between the buy and sell price; it can widen outside main trading hours.
- Savings-plan fees: for ETF and stock savings plans — free at many brokers.
- Custody fees: the annual fee to hold your securities — $0 at most online and neobrokers.
- FX fees: surcharges when trading in US dollars or other currencies.
How safe is my money with a broker?
On safety, you need to separate two things cleanly — the cash in your settlement account and the securities in your account. Both are protected, but in different ways.
The cash in your settlement account is covered by the statutory deposit guarantee — in the EU, up to €100,000 per customer per bank. Your securities, by contrast, are segregated assets: legally they belong to you, not the broker, and they remain yours even if the broker becomes insolvent — so the €100,000 cap does not apply to securities. Still, make sure your broker is regulated (in Germany by BaFin, in Spain by the CNMV, in Italy by CONSOB; rules vary by country, so check your local regulator). What none of these protections covers is market risk: if a stock in your account falls, that loss is real.
How do I choose the right broker?
The best broker depends on your use case. If you run a monthly ETF savings plan, a cheap neobroker with free savings plans is usually best. If you trade a lot across many asset classes, the broader feature set of a classic online broker pays off. If you value in-person advice, a branch bank fits — but budget for the higher fees. Also check that the broker is regulated and offers the asset classes you care about, such as crypto or interest on idle cash.
FAQ — What is a broker? 2026
What is a broker simply explained?
A broker is the intermediary, or platform, you use to buy and sell securities such as stocks and ETFs on the stock exchange. Retail investors cannot trade directly on an exchange, so they need an authorised broker to do it. You open a securities account with the broker; it executes your orders and holds your securities for you.
What is the difference between a neobroker and a bank?
A neobroker is an app-based, very cheap trading platform (e.g. Trade Republic or Scalable Capital) with often-free savings plans and low order fees, but no personal advice. A branch bank offers in-person advice but is usually much more expensive for securities trading. A classic online broker sits in between: a broader feature set at moderate fees.
Is my money safe with a broker?
Yes, but in two different ways. The cash in your settlement account is covered by the deposit guarantee — in the EU up to €100,000 per customer per bank. Your securities are segregated assets: legally they belong to you and remain yours even if the broker goes insolvent. What is not protected is market risk: if the value of your stocks or ETFs falls, that loss is real.
Which broker is best for beginners?
For beginners who mainly want to run an ETF savings plan, a cheap neobroker with free savings plans and zero custody fees is usually the simplest choice. The key is that the broker is regulated (for example by BaFin in Germany, the CNMV in Spain or CONSOB in Italy) and offers the asset classes you want to use. Match the broker to your use case — ETF savings plan, active trading, crypto, or interest on cash.