How to become a stockbroker

So, you want to become a stockbroker?


ALSO READ: best stock picking newsletter


But where do you even start?

You may be wondering…

  • Should I be a stockbroker?
  • What qualifications do I need?
  • Do I have what it takes?

Stockbrokers can lead exciting and lucrative careers; but many people are overwhelmed by the prestige and exclusivity of the occupation.

As it turns out…

…becoming a stockbroker is similar to many other occupations.

Becoming a stockbroker involves hard work, passion, and determination.

This article will give you everything you need to get into stockbroking and show you how to make your first commission.

But first thing is first…

What is a stockbroker?

A broker is someone who buys and sells goods on behalf of others.

Stockbrokers are no different…

…they buy and sell stocks and other securities on behalf of their clients.

Their commission comes from making the transaction for their client.  These clients can be individuals or institutions.

The word “stockbroker” probably conjures the image of someone from one of the Wall Street movies, taking calls on a noisy trading floor and talking a mile per minute.

While Hollywood has made the career seem like all glitz and glamour, the reality is that being a stockbroker involves a lot of long days and perseverance.

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A Day in the Life of a Stockbroker

A stockbroker’s day starts early…

In order to be ready to speak with clients once trading starts, they must show up hours before the stock market opens to prepare for the day ahead!

Once trading begins, they contact their existing clients to make investment recommendations based on their clients’ portfolio.

In order to give proper investment advice, a stockbroker must have…

  • A strong understanding of the stock market
  • The ability to analyze a portfolio

But if you are getting commission regardless of how your clients portfolio performs, who cares?

Well, it works like this…

  1. The better advice you give, the more money your client makes.
  2. The more money your client makes, the more trades they will do with you.
  3. The more trades your client does, the more commission you make.

And ideally your clients will recommend you to their friends!

That’s right – it is not all about buying and selling securities when you are a stockbroker.

Without clients to do transactions for…

…you won’t be making any commission!

A new stockbroker rarely enters their career with a list of clients who want to give them their money.

In the first few years, the majority of a stockbroker’s time is spent growing their portfolio of clients.

How does one grow their portfolio?

How can you find clients?

For a new stockbroker, finding clients can be a daunting task.

But think of it this way…

You must have at least one person in your network that needs help investing. Additionally, every person in your network must have at least one person in their network that is looking to invest.

So, what’s the best way to find these prospects?

We have a few tips for you…

  • Cold call prospects
  • Leverage your network from your hometown, college, and previous jobs
  • Send a newsletter to your LinkedIn contacts that gives advice on the market
  • Give free seminars on securities to the public

You need to…

…put yourself out there, leverage your network and MAKE IT KNOWN that you are a licensed stockbroker!

But how do you get all this confidence to sell your brokering services?

Trust me, this will come later on once you join a firm and gain the experience. But for now, just pretend (we won’t tell).

What skills do you need?

The key to being a successful stockbroker (and with any career) is to provide value.

When you give value, you get value.

To build a solid client base, you have to be willing to put yourself out there.

Here are some other qualities you need to be a successful stockbroker:

Communication skills

Securities trading is not something that anyone on the street is familiar with.

It is a complicated topic, and analyzing it is not an easy task.

That’s why you have to be able to…

explain your investment advice in layman’s terms.

Excellent communication skills will allow your clients to better understand the advice you are giving and help build trust.

Sales skills

While some stockbroker positions come with a base salary…

…you only make the big bucks when earning commission from selling high value securities.  

Like we discussed, clients won’t be handed to you; therefore, you will need to market yourself and network to build your portfolio.

You will need to be able to convince prospective clients why YOU are the person to trust with their money.

Numerical skills

Advising clients on which securities to buy means you need to be able to analyze those securities.

Since securities are valued by numbers…

…you must understand what they mean so that you can explain them to your clients.

So, you have the skills to be a stockbroker and the drive to make it happen. If not, then take some classes on Udemy to learn them. These are essential skills that you need to learn to be successful. So, start learning them now.

Now what?

What qualifications do you need?

Telling someone else what to do with their money is a BIG responsibility.

Logically, you need to have some formal training in order to be able to do so.

Check out the following steps to see what you need to become a stockbroker…

Step I: College Degree

While not required…

…most entry-level financial services sales positions require a bachelor’s degree.

It would be helpful if your degree is business or economics related. Additional classes in statistics and quantitative analysis are also beneficial.

Some brokers choose to get their MBA, as well. This will make you a stronger job candidate and create greater earning potential.

An educational background in financial markets and accounting principles is step one to becoming a stockbroker.

If you are on the fence about going back to school. I would recommend getting a degree online. Having a Finance or Business degree will definitely put you ahead of the competition. BUT be careful, don’t get a degree from a sketchy online school.

I recommend getting it from Coursera. They work with the top Universities in the country to provide 100% online experiences. You can see all their Business Degrees Here.

Step II: Mandatory Licenses

There are necessary licenses to obtain if you want to become a stockbroker.

In order to legally sell securities, you’ll must pass the General Securities Representative Exam…

…otherwise known as the dreaded Series 7.

This test is administered by the Financial Industry Regulatory Authority (FINRA).

In order to take this exam, you have to be sponsored by a firm that is a member of FINRA or another regulatory authority.

But wait a minute – you have to get a job before you can get the license to become a stockbroker?

Basically, yes.

Once you find a firm that will sponsor you, the firm will apply for you to take the exam by filling out a special form.

What is the test all about?

The Series 7 is a difficult test consisting of 125 questions that you have 225 minutes to complete.

Recently, it became combined with a separate Securities Industry Essentials (SIE) Exam, which consists of 75 additional questions and lasts 105 minutes.

You need to pass BOTH exams in order to get your license.

They are not easy… So Practice! Practice! Practice!

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The Series 7 consists of FOUR parts:

  • (F1) Seeks Business for the Broker-Dealer from Customers and Potential Customers (7%)
  • (F2) Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives (9%)
  • (F3) Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records (73%)
  • (F4) Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions (11%)

In addition to the Series 7, you will need to pass the Series 66 and Series 63 exams to be registered in your state.

Once you pass these tests, you will be authorized to buy and sell most securities.

Congrats!

Step III: Additional Exams

Depending on the firm that you are employed with…

…you may need to take additional exams to be able to trade other securities.

For instance, you would have to take the Series 53 in order to be able to buy and sell municipal bonds.

Also, even if not required by their firm, some stockbrokers will get additional certifications to land higher-paying positions in the industry.

Now that you know what licenses you need to get, the next step is to find a firm that will sponsor you.

Pro tip: the easiest way to pass all the FINRA exams is to PRACTICE! Make you sure subscribe to a reliable question bank. Click here for 10% off ExamEdge 

Where should you work?

What is the best way to get your foot in the door of a firm?

Internships, internships, and more internships.

Many brokerage firms and investment banks accept summer interns.

Tip: for finding jobs and internships faster, use a site like Jobscan.com. They will help you optimize your resume and match you with the RIGHT employers SOONER.

It’s great for finding StockBroker jobs or any jobs really.

Try it now

These internships will not only be a great learning experience to get your feet wet in stockbroking…

…in many cases, it can also serve as an extended job interview.

By the way: internships are not just for college students. Even as a graduate, you can benefit from getting an internship in a stock brokerage.

There are several different types of firms that you have the choice of joining.

The best type for you will depend on your comfort level with sales, and how much independence you need when brokering deals.

Here are the FOUR major types of stock brokerages:

1. Full-service firms

Full-service firms (or “wirehouse” firms) are the biggest player in the industry.

Some examples are:

These types of firms provide you with the most training, including:

  • Sales training
  • Product training
  • Compliance training

You will also likely be provided with desk space, business cards, and marketing and administrative support.

While these types of firms provide the most overhead support, they are also the most restrictive in the types of products that you can sell.

Under a full-service firm, you are seen more as an employee; you represent the firm’s brand and products, and in the end, your pay comes from how well you do those things.

Wirehouse firms are also the most conservative of brokerage types: think business formal attire and minimal water cooler chatter.

These firms will likely give you a base salary with a commission structure layered on top.

The commission typically ranges from 30% to 60%, depending on productivity, tenure, and other factors.

Sound easy enough?

Not so fast…

…many of these firms have high sales quotas.

What happens if you don’t meet it?

You may be shown the door!

The cut-throat nature of full-service firms isn’t for everybody.

If you’re looking for a way to get your feet wet with stockbroking and learn about the business, without a high sales quota to meet in the offset, then you may want to look elsewhere.

But don’t fret – we have a few more options for you…

2. Banks

On the surface, working as a bank broker is similar to a full-service firm.

You represent the bank’s products, and are given the majority of your administrative support.

The main difference is that the commission payouts at banks are much lower than at full-service firms.

If working as a bank broker is restrictive and you don’t get high commission cuts, then what’s the point?

Two things…

  1. First, there are no sales quotas to meet.
  2. Second, you have access to the bank’s customer base. Every person that walks through the bank is a prospect for you. You don’t get that at wirehouse firms!

For example, a teller may have a customer who has a maturing CD account. The teller can then refer that prospect to you to give advice on how to grow their CD.

You can also make yourself visible in the bank, asking each walk-in whether they’re interested in opening an investment account along with their new checking account.

Working in a bank will come with a more casual atmosphere compared to a big wirehouse firm.

But beware…

…the types of clients walking into a bank are very different from those calling into a wirehouse.

The types of products they’re looking into are much more low-risk, think…

  • Fixed annuities
  • 401(k)
  • Mutual funds

There is nothing wrong with these securities, and the payout potential can be just as high as at a full-service firm.

However, the way you frame the products will have to be done differently with bank clients.

You will also need to build rapport with your other bank staff.

After all, their referrals can help you multiply your clientele!

This means helping your fellow bankers become familiar with the products you are selling, and the type of client you can help out.

3. Discount Brokerages

The other type of firm that you can join if you are not keen on high sales quotas are discount brokerages.

These types of firms, such as Charles Schwab or Fidelity, cater to walk-in clients, and offer a much broader array of products than full-service firms.

You will be given a base salary, as well as incentives based on how much and which products you sell.

In addition to selling securities, you will also be required to perform administrative tasks such as…

  • Cashiering
  • Setting up new accounts
  • Paperwork

Familiarity with a broad range of products makes discount brokerages a good foundation for your career.

During your time there, you can even build a base of clientele to take with you to a firm with higher payouts!

4. Independent broker-dealers

Independent brokerages are just what they sound like…

…they give you back-office support in areas such as compliance and trade execution, but otherwise you are independent.

Some of the best known players include Raymond James and LPL Financial.

But it wouldn’t make much sense to start at one of these firms to start out.

These types of firms are ideal for brokers who have experience and clients, and don’t need as much overhead support.

Unlike full-service firms, independent brokerages don’t require their brokers to sell proprietary products.

They also offer a much broader range of products and services than discount or full-service firms.

Independent broker-dealers also have fewer restrictions on the clients you can work with. Some full-service firms will only let you work with clients with a specific net worth.

As an independent broker, you can work with the clients of your choosing.

Because of the relatively minimal overhead…

independent brokers have the highest commission payouts (typically from 80% – 95%).

The type of brokerage firm that you choose will determine your growth and success in your career as a stockbroker.

Having the right support and resources will make the difference between making the bare minimum and making it to the top.

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How much can you make?

Here is the most important part, right? How much can you expect to make as a stockbroker?

In 2017, the Bureau of Labor Statistics (BLS) estimated that…

  • the lowest 10 percent of stockbrokers earned less than $33,060
  • the highest 10 percent earned over $208,000

Not bad!

Keep in mind…

…those who make the biggest trades and have the most clients make the most money.

The bottom line is, your success in this field will largely depend on how hard you are willing to work.

As a stockbroker, you will get back what you put in.

Is this the right career for you?

Besides landing an internship and being sponsored by a firm, what are some things you can do today to start building your stockbroker career?

As with any big life decision, it’s a good idea to try something out before diving in head-first.

Like we mentioned in the beginning of this article, a strong interest in everything that is financial markets is crucial to be successful as a stockbroker.

How do you know if you have an interest in this sort of thing, and how do you learn more about it?

One way to measure your interest in stocks is to join a local investment club.

This way you can simulate investing money in various assets, to see what being a real stockbroker might be like.

Stock-Trak also has a stock market simulation game you can use to simulate making real trades.

Making a portfolio and seeing how your choices turn out will give you an idea for market analysis and investment strategies.

Some other things you can do include…

  • Read investment books
  • Watch videos
  • Attend seminars

Once you make it known to others that you have an interest in the stock market, you will begin to encounter like-minded people and make connections that can help you land your first internship or job at a brokerage.

So now you have all the information you need to jump-start your stockbroker career, what will be your first move to make your first commission?

Leave a comment at the bottom of this article to share one thing that you will do TODAY to launch your stockbroker career!

To summarize:

1. Consider getting a business/finance degree online from Coursera

2. Make sure to practice for the FINRA exams! Use ExamEdge for access to 3k+ questions.

3. Learn sales skills, communication skills and numerical skills from Udemy

4. When you’re ready to start looking for a HIGH paying job, use Jobscan to speed up the process.

 

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