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Learning How to Become a Stockbroker

Jason BondJason Bond ·

A stockbroker helps clients ensure their financial futures by buying and selling stocks and other financial securities. This requires having expert knowledge of the stock market, the companies whose stocks they trade, licensing, and education. The job has many ups and downs as the market changes, but stockbrokers who can weather the storms often enjoy lucrative salaries.

When exploring how to become a stockbroker, it’s important to look at the following areas:

  • How to work as a stockbroker.
  • Education needed to be a stockbroker.
  • Skills and qualifications needed to be a stockbroker.
  • How to get a stockbroker license.
  • Stockbroker salaries.
  • Work environment.
  • Stockbroker job outlook.
  • How can I find a job as a stockbroker?

How to Work as a Stockbroker

Stockbrokers buy and sell financial securities or financial instruments representing ownership. Securities include financial investments such as stocks, bonds, and certificates of interest, which share the profits from products such as gas and oil.

Stockbrokers primarily deal with stocks or shares of a company. For example, an individual would work with a stockbroker if they wanted to purchase a few shares of Starbucks stock. Each share of stock they purchase represents a certain percentage of ownership in Starbucks.

Stocks’ prices fluctuate, sometimes daily depending on the state of the economy or market conditions. Stock prices can rise and fall as a result of an event, either positive or negative. For example, if the price of gas drops, BP stock prices might decrease. Likewise, when Apple announces the release of a new product, the price of its stock often increases.

A stockbroker buys and sells stocks for clients, who can be individuals and institutions like nonprofit organizations and private universities. Some stockbrokers work on their own while others work for large financial companies such as TD Ameritrade, Charles Schwab Corporation, or Fidelity Investments. They work directly with clients, helping them invest money for retirement or trade stocks for short-term gains. Some might even act as general financial advisors giving clients advice on various financial matters, including life insurance policies and real estate investments.

Occasionally, customers direct their stockbrokers when to buy and sell the stocks they want. Usually, though, stockbrokers stay abreast of their clients’ investment portfolios and recommend when to buy and sell holdings by researching publicly traded companies, their finances, and their products. For this reason, stockbrokers must be knowledgeable about market trends and which stocks offer good short- and long-term investments.

While it’s important for stockbrokers to stay in close contact with clients, they also spend time expanding their client list via word of mouth, marketing campaigns, direct mailings, and cold calls.

Stockbrokers often trade stocks via computer networks that connect them with major stock exchanges, including national ones such as NASDAQ and the New York Exchange, as well as international ones such as the Hong Kong Stock Exchange, London Stock Exchange, and Euronext.

Floor brokers negotiate and make deals face to face with other brokers at major stock exchanges. Unlike stockbrokers, they usually don’t deal directly with clients.

Education Needed to Be a Stockbroker

While there are no specific educational requirements needed to become a stockbroker, certain coursework or degrees provide definite advantages when entering this field. Classes in quantitative analysis, statistics, and mathematics can help stockbrokers establish a solid base. Most individuals obtain an undergraduate degree in business, and many stockbrokers also have a master’s in Finance or in Business Administration (MBA).

Most individuals enter this career field as college interns working for banks or brokerage firms, where they can gain valuable on-the-job experience. To become stockbrokers, they must demonstrate a solid understanding of accounting practices, regulations, and financial markets.

Skills and Qualifications Needed to Be a Stockbroker

In addition to experience and education, individuals need specific skills and qualifications to be successful as stockbrokers. They need to have excellent interpersonal skills for working with clients and the initiative to cultivate and grow their client list.

They should have attention to detail and possess excellent analytical skills to interpret rapidly changing market factors and how those can potentially impact their clients’ portfolios. Stockbrokers need strong mathematical skills to calculate investment formulas. They must also have the ability to make decisions quickly when deciding when to buy or sell stocks.

How to Get a Stockbroker License

Stockbrokers must have a license to buy and sell stocks on behalf of their clients. Obtaining a stockbroker’s license requires passing the Financial Industry Regulatory Authority’s (FINRA) examination series.

The tests stockbrokers take depend on individual state licensing bureau requirements and the types of activities they plan to engage in. Each exam has an exam fee, a fixed number of multiple-choice questions, and a time limit. They include:

  • The Series 57 Exam. Also known as the Security Traders Representative Exam, the Series 57 exam covers a range of topics, including record keeping, trading, investment products, and professional conduct. Individuals must receive a passing score of 70% or better to trade stocks.

    In addition to the Series 57 exam, individuals wanting to become registered Security Trader Representatives must also pass the Securities Industry Essentials (SIE) exam.Individuals have 105 minutes to complete 50 questions for the Series 57 exam and an additional 105 minutes to complete the 75 questions of the SIE exam. Each costs $60.

  • The Series 7 Exam. Individuals must pass the FINRA Series 7 exam, sometimes referred to as the General Securities Registered Representative Exam, with a minimum score of 72% to work as stockbrokers. This test covers the Securities and Exchange Commission’s (SEC) rules and regulations, as well as investing and investment products.

    Individuals have 225 minutes to complete the 125 questions of the Series 7 exam, which costs $245. For individuals to receive their General Securities Representative registration, they must also pass the SIE exam.

  • The Series 63 Exam. Most states require stockbrokers to successfully complete and pass the Series 63 test, also known as the Uniform Securities Agent State Law Exam. This test includes questions about the tax code and stock market trading. Written by the North American Securities Administrators Association, the Series 63 exam is administered by FINRA. Examinees pay $135 to take the test and have 75 minutes to complete 60 questions.

After receiving their FINA registration, stockbrokers must take continuing education courses to maintain their stock market licenses. These classes help them stay current on SEC regulations and tax laws.

Stockbroker Salaries

In 2017, the U.S. Bureau of Labor Statistics (BLS) reported the median annual salary for commodities, securities, and financial services agents was around $64,000. This represents the middle of the pay scale, meaning half the individuals in this career field earned less than $64,000, and the other half earned more. Individuals at the top of the pay scale were making around $210,000, while those at the bottom of the salary ladder earned around $33,000. Individuals working for securities and financial investment companies generally earned the highest salaries.

While stockbrokers earn straight salaries at the beginning of their careers, most move to base salaries plus commissions.

Work Environment

Stockbrokers work long hours building their client lists, particularly at the beginning of their careers. In addition to advising clients, stockbrokers need to have a strong ability to sell, because a large portion of their income is generated through commissions.

To establish a strong client list, stockbrokers should communicate well with people, build rapport easily, and handle rejection professionally. This industry is very competitive because one stockbroker can assist clients just as easily as another.

Stockbroker Job Outlook

According to the BLS, about 376,000 individuals worked as commodities, securities, and financial agents in the U.S. in 2016, with more than 40% of individuals working for commodities, securities, and financial investment companies. The BLS anticipates this career field will increase around 6% from now until 2026, with the shift toward nontraditional pension plans accounting for much of this projected growth.

How Can I Find a Job as a Stockbroker?

Networking helps many individuals land their first jobs as stockbrokers. Completing a college internship is another great way to make important industry contacts and can even lead to job offers once you graduate. Even if an internship doesn’t lead to a full-time job, the experience and networking connections can be invaluable.

If you attended business school, an alumni network is another way to connect with industry professionals and potential clients. Connecting with other individuals working in the investment field can help you learn about potential job opportunities.

Learn how to trade like a pro and get other industry tips by downloading Jeff Bishop’s free “Option Profit Accelerator” eBook today.

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