Stockbrokers owe much of their public image to blockbusters like “Wall Street,” “The Big Short,” “The Wolf of Wall Street,” and “The Pursuit of Happyness,” but these professionals’ real-life responsibilities aren’t as widely known as the exploits of their more glamorous Hollywood counterparts. Stockbrokers purchase and sell stocks to benefit the financial health of their brokerage and clients. A strong financial acumen, analytical skills, and an ability to make professional connections are valuable assets for anyone interested in becoming a stockbroker. While there is no set path to a career in this field, aspiring stockbrokers can take several steps that can prepare them to thrive in this role.
What Does a Stockbroker Do?
Stockbrokers buy and sell stocks issued by corporations to benefit their clients’ investment accounts. They are typically employed by brokerage firms. These brokerage firms can be located across the country and world, although some of the largest and most successful are located on New York’s Wall Street.
There are three types of brokerage firms: full-service, discount, and bank. Brokers at full-service firms, like Edward Jones or Raymond James, can provide advice to clients in addition to initiating their stock purchases or sales. Brokers at discount firms, like Charles Schwab or Ameritrade, conduct buying and selling on behalf of their clients but generally do not provide financial advice on which stock trades to make. Bank brokers work at banks and often provide safer investment options to their clients. The type of firm he or she works for will likely affect a stockbroker’s salary.
At full-service firms, the responsibilities of a stockbroker include determining which stocks to purchase by conducting frequent, extensive market and economic research. Brokers can meet with and provide advice to current clients on which stock trades to make and also find new clients for whom they can invest in the market. Throughout the day, stockbrokers keep close watch on any financial news or developments that may impact their trading activity.
Because stock trading is a competitive industry, brokers need to possess certain financial knowledge and skill sets to succeed. In a 2008 seminar held by the California Debt and Investment Advisory Commision, Deborah Higgins, president of Higgins Capital Management, Inc., noted experience in public funds investing, market knowledge, strategic and tactical ideas, and independent thinking as traits that clients should look for in brokers acting in an advisory capacity.
Stockbroker Pros and Cons
The job of a stockbroker is not without its ups and downs. Here are some of the pros and cons:
- Great career option for people who have in-depth knowledge of the stock market
- Offers the potential to earn a high income.
- Good fit for ambitious people with strong selling skills.
- Must be able to handle rejection and stress.
- Competitive work environment.
- May require excessively long work hours.
- May have a hard time building a client base due to the rise of online trading.
How to Become a Stockbroker
While there are no specific schooling requirements for becoming a stockbroker, certain degrees or coursework can give you an advantage in the job.
You might want to consider a bachelor’s degree in business. Many stockbrokers also have a master’s in business administration (MBA) or a master’s in finance. It also helps if you have some education in math, statistics, and analysis.
Stockbrokers often start working for a firm or bank in a role other than broker. Some even begin as college interns. That is where they gain know-how while they are on the job. To become a broker, they must show a deep understanding of money markets, laws, rules, and accounting practices.
Brokers need to pass the General Securities Representative Exam, commonly known as the “Series 7” exam, administered by the Financial Industry Regulatory Authority (FINRA). To take the exam, a person must be sponsored by a FINRA member firm or a member of a similar self-regulatory organization (SRO).
The Series 7 exam is hard and consists of 125 multiple-choice questions that must be finished in 225 minutes. It must be combined with a separate Securities Industry Essentials Exam, which consists of 75 questions and lasts 105 minutes.
These exams will permit a broker to buy and sell most securities, but there may be other exams required to trade certain things. For example, someone who wants to buy and sell municipal bonds may have to take the Series 53 exam. There are also other required exams, including the Series 66 and Series 63 exams, to be registered in various states.
To make it as a successful stockbroker, you’ll need to work long hours, especially at the start, when you’re building your pipeline or list of clients. The job consists of giving clients advice and requires a strong ability to sell, since you’ll earn your pay through commissions.
If you connect well with people, can build rapport easily, and handle rejection well, you’ll have a good chance of winning new clients. The job tends to be very competitive, since one broker can help a client buy stock as easily as any other one can.