If you enjoy sales and have an interest in the finance world then stock broker could be a perfect career option for you. Countless films such as Boiler Room, the Wolf of Wall Street, and many more other films made this job of a stockbroker seem intimidating. The job of a stockbroker seems lucrative, exciting and attractive. In reality, it is not that easy.
But if you are willing to pursue your career as a stock broker then you need to understand something more than know about this job. Here in this article, we will explain what a stockbroker does? How to become a stockbroker, and how much a stock broker earns?
What Is a Stock broker?
A Stockbroker is a mediator or middleman between a trader and the financial market. Traders and investors can’t buy and sell any financial instruments directly from the market. These assets are bought and sold through share markets like NASDAQ and the New York Stock Exchange. That is why there is a need for stockbrokers arise. The stockbroker helps traders and investors to execute the trades.
Over the years stockbrokers evolved, now stock trades are placed electronically through a brokerage firm. But for large institutional investors, human brokers still handle their trades.
Stockbrokers are well knowledgeable in the financial markets and can provide the best advice about the best time to buy or sell an asset.
It is the job of a stockbroker to find out the best prices for their clients. In return for giving valuable advice and executing the trades for clients, a stockbroker gets some commission which could be a flat fee or some percentage of the transaction value.
Now with the increasing demand for online trading, the demand for human stockbrokers becomes very less. But there are still many cases where an investor is more interested in executing a trade through a broker.
What does a stock broker do?
A stockbroker is a licensed person who has the authority to sell and buy shares or other securities on behalf of their clients, whether it is an individual or institutional investor. The broker earns from the commission based on the transaction value.
Stockbrokers are not only responsible for finding the best prices for their clients, but also they have so many duties to perform. Some of their duties involve:
- Making network and finding new clients
- Managing investment portfolios of clients
- Keeping themselves updated with the latest financial news
- Provide authentic and right investment advice to their clients
- Precisely evaluate the financial reports.
- Update the clients on a regular basis about the condition of their portfolios and investment.
- Making the required changes strategies according to the market conditions and goals of clients.
Pros and Cons of Being a Stock broker
The job of a stockbroker seems lucrative but there are various challenges in it. Here are some of the pros and cons of being a stockbroker:
Pros of Being a Stock broker
- It is a good career option for ambitious people who have great skills as a salesperson.
- Get to learn about new companies and sectors everyday.
- Individuals who have good in depth knowledge of the stock market, a stockbroker is the perfect career for them.
- Being a stockbroker you get job security because as long as financial markets will exist, jobs of brokers are safe.
- Stockbroking facilitates great income potential through commissions.
- A person who can handle rejection and do not get disappointed especially when they don’t get wished results.
- There are huge career advancement opportunities. In some time you can see yourself in a higher position in a company.
Cons of Being a Stock broker
- Need to work in a tremendously competitive environment.
- Requires extremely long working hours.
- The stress is so high that few brokers do not get much time to spend with family.
- In starting they can face difficulty in creating a client base because of the huge availability of online trading.
- Finances of a stockbroker totally depends upon the market.
- A broker should be reachable all the time when a customer has any question.
- It requires you to be a morning person because most brokers wake up early and prepare themselves for the market by reading the latest updates.
- Job of a stock broker requires making the right decision at the right time and staying alert no matter what the session hours.
How to become a stock broker
While there are no particular qualifications required to become a broker but some courses and degrees can benefit you in your future career. Here are some fundamental steps which you can follow to become a broker.
Most of the employers ask for a degree in business to appear for an entry level position in financial services such as stocks, commodities and securities. BY the way there is no requirement of a specific degree of four years or three years but a degree in finance, economics, business administration or accounting is preferred. Because these courses will help you to understand the basics of statistics, mathematics and quantitative analysis which are used all over in finance services.
To get in depth knowledge in all these sectors, you can also pursue a Master of Business Administration (MBA). It is also possible that the candidate will be rewarded with a good position with an MBA degree by their employer.
Complete an Internship
Many stockbrokers start to work in a brokerage firm or in a bank during their college days to get on the job experience and also they can get in depth knowledge of rules and regulation, financial markets, and accounting services.
Many brokerage firms hire interns during their college days so that they can work in offices. During internships, the candidates make invaluable contacts, in depth experience and job opportunities just after completion of college. Internships are also a great way to grab the opportunity that many brokerage firms provide additional job training to new stockbrokers.
To get the license of broker, the stockbrokers need to pass the National Association of Securities Dealers’ General Securities Registered Representative (Series 7) exam. This exam is conducted by the Financial Industry Regulatory Authority (FINRA). To appear in this exam, a candidate must be sponsored by a firm which is a member of SRO (self-regulatory organization) or FINRA.
The candidates have 225 minutes of time to complete 125 multiple choice questions. The series 7 exam must be combined with one another exam which is Securities Industry Essentials Exam. This also includes 75 questions and time to complete the exam is 105 minutes.
All these exams will allow a broker to buy and sell securities, but there may be some other exams as well to trade other financial instruments. Candidates need to pass the exams according to their states such as series 63 and series 66.
You need to work for long, stressful hours and especially when you are a beginner and building your own client base. This job requires great selling skills and convincing power to convince your clients.
When you will start to communicate really well with your clients, you can easily build your rapport. Also, this job requires you to be tough in a competitive environment.
Most of the new traders and investors need assistance while buying and selling stocks. Billions and millions of dollars worth of securities and stocks are traded on stock exchanges everyday and not all the traders use computers to execute the trades.
That is why the need of stockbrokers is not going to lower anytime soon. So if you are still thinking of being a stock broker then put all your efforts in it to make it happen for you.