CCompound

Začínáme s investováním

What Is a Broker and Why Do I Need One

5 min readCompound

Key takeaways

A broker is an intermediary through whom you buy and sell securities such as shares or ETFs — without one you cannot access the exchange.

Why do I need a broker?

The exchange is not open to individuals directly. If you want to buy shares or ETFs, you must do so through a licensed firm — a broker. The broker forwards your order to the exchange, the transaction takes place and the security is registered in your account. You pay a fee for this — or nothing, since some brokers charge nothing.

How do I choose a broker?

What to focus on when choosing:

Tip: A detailed comparison of brokers available from the Czech Republic can be found in the article How to choose your first broker in the Czech Republic. Compare at least 2–3 platforms before opening an account.

Is my money safe with a broker?

A regulated broker in the EU must keep your money and securities separate from its own assets. If the broker goes bankrupt, your shares and ETFs are still yours — they are not part of the bankruptcy estate. There is also an investor compensation scheme (or equivalent in another EU country) that protects clients up to EUR 20,000.

What do I need to open an account?

A valid national ID card or passport, an email address, a bank account in your name and approximately 15–30 minutes. Most brokers verify identity online — you upload a photo of your ID and a selfie. After approval (usually 1–3 business days) you can send money and start investing. The full process is described in the article How to buy an ETF for the very first time.

FAQ

Can I have accounts with multiple brokers at the same time?

Yes, there is no legal restriction. Some investors use 2–3 brokers for different purposes. But beginners are advised to start with one and get to know it well first. Managing multiple accounts complicates portfolio oversight and tax records.

Is it safe to send a broker thousands of crowns?

A regulated broker in the EU must keep your money in segregated client accounts. It may never use your money for its own trades. Before depositing money, verify that the broker holds a licence from the ČNB or another European regulator.

Is tax payable on gains — and does the broker help with that?

Yes, gains from the sale of securities and dividends are subject to tax. The broker will provide a statement of transactions for the year, but in the Czech Republic you file the tax return yourself. If you trade through a foreign broker, you must declare the income yourself. More in the article on ETF taxation.

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