Broker

A broker is an individual person who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confused with that of an agent—one who acts on behalf of a principal party in a deal.[1]

Definition

A broker is an independent party, whose services are used extensively in some industries. A broker's prime responsibility is to bring sellers and buyers together and thus a broker is the third-person facilitator between a buyer and a seller. An example would be a real estate broker who facilitates the sale of a property.[1]

Brokers also can furnish market information regarding prices, products, and market conditions. Brokers may represent either the seller or the buyer but not both at the same time. An example would be a stockbroker, who makes the sale or purchase of securities on behalf of his client. Brokers play a huge role in the sale of stocks, bonds, and other financial services.

There are advantages to using a broker. First, they know their market and have already established relations with prospective accounts. Brokers have the tools and resources to reach the largest possible base of buyers. They then screen these potential buyers for revenue that would support the potential acquisition. An individual producer, on the other hand, especially one new in the market, probably will not have the same access to customers as a broker. Another benefit of using a broker is cost—they might be cheaper in smaller markets, with smaller accounts, or with a limited line of products.[1]

Before hiring a broker, it may be considered prudent to research the requirements relating to someone using the title. Some titles, such as real estate brokers, often have strict state requirements for using the term, while others, such as aircraft brokers, typically have no formal licensing or training requirements.

Etymology

The word "broker" derives from Old French broceur "small trader", of uncertain origin, but possibly from Old French brocheor meaning "wine retailer", which comes from the verb brochier, or "to broach (a keg)".[2]

Types of brokers

Freight broker

In the movement of freight (cargo), over land in the United States by truck, a freight broker[3] is often used as part of the logistics. This may be part of an overall shipbroking using a cargo broker, a freight forwarder, third party logistics broker (3PL), and even a fourth-party broker,[4] when outsourcing is needed (as opposed to in-house) for freight transportation. The brokering can be single mode or by multimodal transportation and can use specialized brokers on a permanent basis or as needed to ensure timely transportation of freight.

A load may be posted on a truck load board[5] by shippers, brokers, or agents.[6] This may occur with special orders, brokers and/or agents that do not have an established logistics base, or brokers and agents seeking a backhaul for a truck not in a high-traffic lane. Many brokers specialize in certain freight such as full truckload (FTL) or less than truckload, auto, boat or yacht, bulk tanker (liquid or dry), oversize, equipment hauling on lowboys, flatbed, drop deck, or any other mode of freight transportation with enough loads.[7]

Co-brokering

Co-brokering is a legal practice used to ensure there is an available truck to transport freight. A 4PL may use a 3PL broker to match loads with trucks, with a shippers knowledge. The primary broker will take a lesser amount of the fee and the secondary broker will book the load for transport receiving a larger share of the same fee.[8]

Concerns

Double-brokering or rebrokering is illegal and occurs when a broker charges a fee (sometimes 15%) then contracts the load to a second broker who will reduce the freight charge also collecting a fee that can be up to 15%. An $1,150 load going 400 miles would net a carrier $977.50 but the same load double brokered might result in $875.00 to the carrier or another 14.3% brokerage charge. The shipper may not be aware of this and the contracted truck will likely not be dispatch to pick up the load. This might have serious ramifications in case of an accident or incident, especially if there are operating issues with the carrier. Confusion on payment might lead to a possessory lien (as opposed to "freight charges held hostage."), a load not delivered, and lawsuits.[9]

References

  1. 1 2 3 Spiro, Rosann L., William J. Stanton, and Gregory A. Rich. Management of a Sales Force. 12th ed. Boston: McGraw-Hill/Irwin, 2003
  2. ↑ Harper, Douglas. "broker". Online Etymology Dictionary. Retrieved 2010-04-10.
  3. ↑ "Top 50 Freight Broker Companies". Truckers Path. 27 September 2017. Retrieved 20 September 2018.
  4. ↑ "3PL vs 4PL: What are these PLs, Anyway? Layers of Logistics Explained". Cerasis. 8 August 2013. Retrieved 20 September 2018.
  5. ↑ "43 Free Load Boards for Truckers". Commercial Capital, LLC. Retrieved 20 September 2018.
  6. ↑ "What is the difference between a freight broker and a freight agent". JobsInLogistics.com. Retrieved 20 September 2018.
  7. ↑ Aquila, Brett (4 November 2017). "Types Of Trailers In Trucking". TruckingTruth.com. Retrieved 21 September 2018.
  8. ↑ Roch, Gilles. "Co-Brokering vs. Double Brokering". Carrier411. Retrieved 21 September 2018.
  9. ↑ Ashe, Ari (2018-03-28). "More double-brokering ups threat to US truck shippers". JOC.com. Retrieved 21 September 2018.

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