Definition, Types of Agents, and Examples

By 
JULIA KAGAN

Full Bio

  

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of
Investopedia.
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Updated October 19, 2022

Reviewed by ANDREW SCHMIDT

Fact checked by 
KATRINA MUNICHIELLO

What Is an Agent?
An agent, in legal terminology, is a person who has been legally empowered
to act on behalf of another person or an entity. An agent may be employed to
represent a client in negotiations and other dealings with third parties. The
agent may be given decision-making authority.

Two common types of agents are attorneys, who represent their clients in
legal matters, and stockbrokers, who are hired by investors to make
investment decisions for them. The person represented by the agent in these
scenarios is called the principal. In finance, it refers to a fiduciary relationship
in which an agent is authorized to perform transactions on behalf of the client
and in their best interest.

KEY TAKEAWAYS

 An agent is authorized to act on behalf of another person, such as an

attorney or a stockbroker.
 People hire agents to perform tasks that they lack the time or expertise
to do for themselves.
 A universal agent has wide authority to act on another's behalf, but a
general agent or special agent has more limited and specific powers.
 Agency by necessity is where an agent is appointed to act on behalf of
a client who is physically or mentally incapable of making a decision.
 Most agent jobs require a license and registration with the appropriate
state authorities.

Understanding an Agent
An agent is someone that is given permission (either explicitly or assumed) to
act on an individual's behalf and may do so in a variety of capacities. This
could include selling a home, executing a will, managing a sports career,
managing an acting career, being a business representative, and so on.

Agents often have expertise in a specific industry and are more

knowledgeable about that industry's ins and outs than the average person.
For example, if you started gaining attention as a musician, you would hire a
music agent to help guide you through getting a record deal, signing record
contracts, and arranging your touring schedule.

As you would not have any experience with the record industry, you would
need an agent to look out for your best interests and take care of a lot of the
work that you would otherwise most likely not be able to complete on your
own. This would also free up your time so that you can concentrate on
making music.