Freight Brokers vs. Freight Agents: 5 Key Differences
People looking to start a career in the logistics industry are often confused between freight agents and freight brokers. Is one better than the other? How do they work together? While it takes both freight brokers and freight agents to run a successful freight brokerage, both roles are quite different.
Freight brokers and freight agents make a significant contribution to optimizing the transportation process. Both types of professionals do so by appropriately matching customer needs and hauler capacities. Although a freight broker differs from a freight agent, their duties and concerns may overlap in some cases.
Let’s take a look at some of the most significant differences between freight brokers and agents, including the responsibilities they have, the type of work they do, and the skills they need to be successful.
1. Job Responsibilities
A freight broker acts as an intermediary between customers and carriers to secure the transportation of goods. Rather than taking ownership of the cargo, a freight broker facilitates communication between the two parties. They ensure that the handoff goes effortlessly between customers and carriers and that cargo reaches promptly and securely. Some of the other responsibilities typically included in a freight broker job description are marketing to attract new consumers, pairing consumers with carriers, booking orders, and lining carriers up for loading.
On the other hand, a freight agent’s main role is to help arrange the movement of cargo between their customers and carriers. A freight agent can be an individual or a group of individuals that work as independent contractors under a freight broker’s operating license. Most freight agent job descriptions also mention serving as a client-facing salesperson of sorts who has to find accessible carriers to move a customer’s cargo.
2. License Requirements
Before you start working as a freight broker, you need to get a freight broker license from the Federal Motor Carrier Safety Administration (FMCSA). You first need to get a USDOT number, which is a unique number FMCSA assigns to certain kinds of commercial businesses. Once you have this number, you can begin the registration process on FMCSA’s website.
According to FMCSA, freight broker license requirements also include having in place either a surety bond worth $75,000 or a freight broker trust fund in the amount of $75,000. Freight brokers also have to maintain a level of compliance annually as directed by the FMCSA. They also have to keep all records on file for at least three years.
On the other hand, there are no specific licensing requirements to be a freight agent. They are more like a salesperson working for a freight broker or agency. A freight agent is a customer-facing role that does not typically involve running everyday operations within the business.
3. Liability and Authority
Another big difference between freight brokers and freight agents is that a freight agent does not have their own operating authority and legally cannot arrange the transportation of cargo on their own. As a result, the only way for freight agents to do business is by working with a freight broker. Due to this, freight agents have very little liability, as that lies on the freight broker.
Unlike freight brokers, freight agents are also not concerned with a customer’s creditworthiness. They only oversee the fundamentals of logistics and also focus on maintaining customer and employee relationships.
4. Salary Potential
According to Indeed, freight brokers earn an average yearly income of $80,017, with the top 10% earning over $163,694 each year. Entry-level positions for freight brokers start at $47,372 per year. Some of the top-paying regions are Connecticut ($102,500), Arizona ($102,500), California ($102,500), Texas ($101,875), Kansas ($100,000), and Maryland ($90,000).
Freight agents, on the other hand, make $62,753 on average. Their salaries can vary between hourly, yearly, or commission. If the salary is commission-based, it is tied to the amount of money that the freight agent brings in for the freight broker. With commissions, the earning possibilities for freight agents are unlimited. Freight agents typically earn a commission ranging between 60% and 80% of the gross margins.
5. Costs and Setup
Becoming a freight agent is usually more cost-effective than being a freight broker. As freight agents are independent contractors, they do not have to buy expensive shipping management tools and software, buy liability and cargo insurance, rent office spaces, or deposit thousands of dollars as trust funds or surety bonds. On the other hand, being a freight broker requires expensive investments. Due to the costs involved in getting recognized to work as a brokerage agency, individuals with experience in the cargo sector often choose to become freight agents first.
Freight agents do not need an operating license, or the resources required to run a full-time brokerage agency. As such, they can work as individual contractors who are usually mobile or home-based. In contrast, freight brokers are often larger entities with fixed offices. They often hire several freight agents to represent their business and act as middlemen between the clients and the transporters. In some cases, customers would rather trust their freight with recognized freight brokers, who most often can tap cargo agents.
Become a Freight Broker/Agent with ed2go
Our Freight Broker/Agent Training course teaches you all the skills you will need to build a successful freight brokerage. In just six months, you will learn relevant laws and terminology, how to set up your business, explore valuable tools and software, how to manage contracts, keep records, market your services, and more.
You will learn how to use negotiation and sales tactics to determine rate quotes between your freight agency, the transporter, and the customer. You will also understand transportation laws and how they impact your business.
Visit our website to learn more about the course.
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