Financial services can be both lucrative and personally rewarding.
What Is a Stockbroker?
A stockbroker executes orders or places trades on behalf of an individual or institution.
Prior to the rise of online brokerages, it was prohibitively expensive to access the major exchanges where market activity occurs. The largest and most commonly known exchanges are the New York Stock Exchange (NYSE) and the Nasdaq. To trade, you must be a member of the exchange.
Alternatively, access to an exchange can be granted via a member firm of the exchange. Member firms and their associates are licensed by the Financial Industry Regulatory Authority, or FINRA, as broker-dealers.
Most stockbrokers work for a brokerage firm. In addition to executing trades, a stockbroker can also conduct sales activities. They are typically paid a commission, although firms may offer other compensation options. Both full-service and discount brokers are focused on movements in an investment portfolio, rather than creating the actual investment strategy. A small number of stockbrokers work for investment banks or specialty brokerage houses that focus on institutional clients and ultra-high-net-worth individuals.
While the titles of stockbroker and financial advisor are often used interchangeably, the latter differentiate themselves by diving deeper into the advisory aspects of a holistic financial plan.
Another type of stockbroker is a voice broker. These individuals are employed by discount brokerage firms to provide a measure of customer service. They may be part of a call center, where they answer general customer inquiries, or provide a concierge service for clients willing to pay for the additional human touch.
A robo advisor is a service offered by a brokerage firm that does not involve a human stockbroker. It typically uses an algorithm and is designed to be a low-cost alternative to a traditional service. Initially, there were concerns that robo advisors would eliminate the human stockbroker role. However, they have actually enhanced the value of personalized planning.
How to Become a Stockbroker
Minimum Education Requirements
While many positions in financial services do not require a college degree, a bachelor's degree is necessary to become a stockbroker.
No specific major is required in this role. Because the field involves a deep understanding of financial principles, laws and regulations, many aspiring traders will seek a major in business administration, finance, economics or even accounting to prepare for a career in this field. Additionally, instruction in behavioral sciences, such as psychology and sociology, are recommended for stockbrokers who hope to move into greater planning roles.
Regulatory Affiliation Requirements
Most firms will assist their employees in obtaining the licenses required by each state. They may make passing the exams within a specified period of time a condition of ongoing employment.
The FINRA General Securities Representative Exam, also known as the Series 7 exam, is one of the most commonly required tests.
As FINRA states, "The [Series 7] exam measures the degree to which each candidate possesses the knowledge needed to perform the critical functions of a general securities representative, including sales of corporate securities, municipal securities, investment company securities, variable annuities, direct participation programs, options and government securities."
There are three additional exams that may be required:
- Series 63 (Uniform Securities Agent State Law Exam)
- Series 65 (Uniform Investment Adviser Exam)
- Series 66 (Uniform Combined State Law Exam): This exam is a combination of Series 63 and Series 65.
These exams require significant study to pass, but there are excellent programs designed to help students successfully learn the content. Many firms will pay the costs associated with both a reputable study program and sitting for the exam. However, some firms may require the student to front the expenses and provide reimbursement upon achieving a passing score.
On-the-Job Training
If you're unsure whether to invest in the education and licensing required for the position, it is prudent to learn more about the field before committing.
An excellent way to do so is to start as a client service associate. In this role, you have the opportunity to experience firsthand what the position entails. You will also gain an appreciation for the paperwork and process to properly onboard new clients, how to professionally communicate with clients, and other key practical skills.
If you enjoy the atmosphere and team approach to the investment field, you will be even more prepared to pass your exams.
Professional Development
Large firms will often provide a dedicated career path for advancement. They will also provide significant training in selling skills, client behavior and other key functions of the various positions in the firm.
This career allows you to choose the types of people you want as clients:
- Large firms are often generalists, meaning that they are established to provide investment services to any client who meets their income and net worth profiles.
- You may also choose a firm that has crafted a niche market. This means working with clients with greater overlapping profiles, such as medical professionals or small business owners.
- Some advisors may seek even more ultra-specialized interests, such as bass tournament fishermen, as ideal clients.
A boutique firm can be a haven for women and minority advisors, as the path to partnership is shorter. Smaller firms can also be extremely lucrative when they dive deep into niche marketing and become well known in their communities as experts in their field. Training can be found by attending industry conferences and accessing educational meetings provided by industry vendors and online programs.
All practitioners should consider expanding their career opportunities by seeking global credentials. These may include the certified financial planner (CFP) and chartered financial analyst (CFA) professional designations. Both are recognized by their respective industries and clients served as evidence of professional competency and acumen.
Should You Become a Stockbroker?
Becoming a stockbroker has enormous upside income potential. According to PayScale.com, the average salary for a stockbroker in 2024 is $65,871, with the potential for total compensation to exceed $200,000.
More importantly, you will have an opportunity to benefit others by being a conduit to the stock market, enabling clients to reach important goals with their life savings. As your skills and experience grow, you will be able to further broaden your clients' opportunities through planning for retirement and college funding. Ultimately, you will be well-versed to address advanced topics such as estate planning and business exit strategies.
There is no specific path to success in this field – you can let your passions, interests and hard work guide you.
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