The stock market plays a vital role in national and global finance. Exchanges worldwide support broad economic growth and are a key element of modern economies. The total value of global equity trading worldwide was $41.8 trillion in the third quarter of 2021.
By facilitating the trade of stocks, bonds and other securities, stock markets present a variety of opportunities for businesses. They can raise funds and give individual investors the chance to realize financial gains through shrewd decision-making.
The stockbroker is at the center of the activity in these markets, carrying out transactions on behalf of their clients and providing professional services related to financial planning and investments.
What Are Floor Brokers?
While most modern brokers work from inside offices and trade electronically, floor brokers carry out their duties within the physical space where a stock exchange operates. Also called pit brokers, these individuals tend to work with businesses like financial service firms and investment funds, as well as especially wealthy individuals, according to Investopedia.
The growth of electronic transactions for securities such as stocks and bonds has made floor broker careers a less common occupation than in the past, but these specialists continue to serve in their unique role for major markets like the New York Stock Exchange.
The stockbroker career is a popular option for college graduates who have earned a relevant bachelor’s degree, such as a bachelor’s in finance or bachelor’s in management. It will be particularly helpful to complete a program that emphasizes topics like finance, economics or accounting.
The U.S. Bureau of Labor Statistics (BLS) groups the stockbroker occupation into the somewhat broader category of securities, commodities and financial services sales agents. That group, which also includes positions like investment banker, accounted for 466,900 active jobs across the country as of 2021. BLS projects 10% growth for the profession through 2031, adding up to an additional 47,700 projected positions.
Compensation for stockbrokers is largely connected to the commissions they earn from successful sales. While alternative models for compensation, such as an hourly rate of pay, are gaining popularity, the traditional commission structure is still common. That means earnings for brokers can be much more variable than in occupations where a base salary is the major component of compensation, even when bonuses and other benefits come into play.
The BLS reports that securities, commodities and financial services sales agents earned a median annual wage of $62,910 per year as of 2021. However, your salary may vary from this standard depending on your success in the career — there is the top 10% of professionals recorded in this category of BLS reports earning more than $189,620. Working as a trader offers an opportunity for substantially high pay.
The trade-off is the potential for high variability in earnings in the short and long terms, and the lack of a firm guarantee of compensation beyond a modest base salary and benefits offered by an employer.
Along with career-specific certification and licensure, a stockbroker generally has to reach certain educational milestones for a potential employer to seriously consider them as a candidate. A bachelor’s degree is commonly required by employers, so it’s in every aspiring broker’s best interest to earn one.
While most employers don’t require that candidates earn a specific type of degree, certain areas of focus can help an applicant stand out. A brokerage firm will likely appreciate an emphasis on finance, business, economics, accounting and related fields, as these relate directly to the job at hand.
Master’s Degrees and Specializations
Stockbrokers build expertise in their field as they start working, developing targeted knowledge that can support career growth in the future. Earning an advanced degree, such as a Master of Business Administration, can also support progress on a professional path. Designed for students who must also address a variety of personal and work-related responsibilities, the online MBA offers flexibility, a variety of digital networking opportunities and many other benefits.
While the general leadership and management knowledge and skills developed in an MBA offer clear benefits to stockbrokers, specialization can lead to a more focused curriculum and stronger career outcomes.
Selecting the finance concentration for an online MBA means more emphasis on the topics that are most relevant for a career related to securities and trading. The BLS notes that brokers who hold an MBA may be rewarded with higher compensation, opportunities for advancement and substantial signing bonuses.
Certification and Training Requirements
Stockbrokers work directly with their client’s money and make financial and investment recommendations. They are generally positioned as trustworthy specialists who can decipher complex financial markets and provide useful, practical advice on a level clients can understand. The trust placed in a stockbroker by a client is substantial.
To that end, stockbrokers require certain credentials and group memberships. On the most basic level, brokers must be members of a major stock exchange, such as the New York Stock Exchange or NASDAQ. Alternatively, brokers may work for a firm that is itself a member of an exchange.
Beyond that need, brokers also must complete specific exams administered by the Financial Industry Regulatory Authority (FINRA) to earn licensure and act in a professional capacity. The Securities Industries Essentials (SIE), Series 7 and Series 63 or 66 exams are foundational.
There are basic exams that every aspiring broker must pass. However, there are also further, more advanced options:
The SIE Exam
The SIE exam is the most basic of the group, focusing on foundational industry knowledge related to product types, risks, financial market structure, regulations and similar topics, according to FINRA. This exam is open to any interested candidate over 18 and is a prerequisite for the Series 7 and Series 66 exams. Participants do not need to be associated with a specific company or sponsor.
The Series 7 Exam
The Series 7 exam represents the next level of testing. It is intended for entry-level professionals, according to FINRA. It focuses on securities — including stocks, bonds and derivatives — and the skills and knowledge needed to sell them effectively and in line with relevant regulations. Those who successfully complete the Series 7 can sell many types of securities afterward, but a Series 63 or 66 certification is often needed to become a full-fledged stockbroker.
The Series 63 Exam
The Series 63 exam is the final step to licensure and the ability to work as a stockbroker. Passing this exam qualifies the exam-taker to work with customers, make purchase and sale orders and take on the many other tasks associated with the profession. The Series 66 exam covers the same content areas as the Series 63 exam and the Series 65 exam, which is required for stockbrokers who work with managed-money accounts, according to Kaplan Financial.
Important Skills and Qualities
A career as a stockbroker is built on trustworthiness, financial acumen, and the ability to identify, track and take advantage of economic trends. The ultimate goal is to provide relevant suggestions and advice, leading to decisions that strengthen a client’s financial standing and provide a strong return on investment while adhering to all relevant regulations. However, those are far from the only qualities, attributes and skills a successful stockbroker must possess. Other foundational considerations include:
- Technological aptitude: Brokers carry out much of their business electronically, from conducting market analysis and ensuring compliance with laws and regulations to communicating with clients and other financial professionals.
- Communication and service skills: Brokers provide a specialized service to their clients, who may not be financial experts themselves. Effective communication about financial strategy and investment options requires a deep understanding of related concepts and analysis and the ability to present information to clients in an understandable and easily digestible fashion.
- Persuasiveness: Brokers must present to their clients the advantages, disadvantages and options of various strategies, as well as sell themselves as trustworthy and capable. Supporting a client’s goals is the broker’s objective, and clients must sometimes be persuaded to act in their own best interests.
- Accuracy and attention to detail: Brokers with relaxed attitudes may not get very far in their careers. What appears to be a small error on a computer monitor — a misplaced zero or extra decimal point — can translate into serious issues for the broker and their clients. Dependable brokers rarely, if ever, make major mistakes.
- Efficiency: Brokers work in fast-paced environments and their careers depend on consistently making sales. Additionally, a significant portion of income stems from commissions earned. The ability to work quickly, yet completely and accurately, is especially important.
Additionally, stockbrokers must be flexible and willing to learn on an ongoing basis, as the stock market is constantly shifting.
Typical Duties of a Stockbroker
Stockbrokers are the channel through which investors access a stock exchange. Because these professionals must hold specific licenses and certifications to engage in stock trading, they are trusted to carry out the instructions of their clients and provide relevant and accurate advice to them.
Many brokers work for a brokerage firm, but others are self-employed. A broker serving as an employee often has access to institutional knowledge, experience and support, but part of the value they generate goes to their employer in exchange for those services. Self-employed brokers have the opportunity to earn more but can face additional risk and instability without the backing of a firm.
Stockbrokers must attract clients since these individual investors represent the broker’s primary source of income. Building and maintaining a client base, and then growing it when the time comes, is vital for success. Brokers may network in groups formally or informally, contact potential prospects individually, and secure referrals from existing clients. In this field, professionals need to have a clear value proposition and the tools to communicate effectively with clients.
Brokers work with individual investors and develop a strategy together that takes a variety of factors into account. A stockbroker must consider client qualities, needs and limitations when building an effective investment plan, including:
- Risk tolerance;
- Overall financial position;
- Available funds;
- Individual goals and objectives for investment;
- Preferences, such as a desire to engage in socially responsible investing.
Stockbrokers who transition into another role should carefully consider the new expectations that they will be subject to before committing to the change.
Stockbroker vs. Trader
Stockbrokers operate as intermediaries and sales agents on either an independent basis or on behalf of their firm. They build and manage a list of retail clients to advise, as well as buy and sell on behalf of. Meanwhile, traders buy and sell securities exclusively on behalf of their organizational assets. Essentially, stockbrokers work directly with clients, while traders manage an organization’s accounts.
Stockbrokers vs. Financial Advisors
Stockbrokers may offer advice to clients, but they typically stick to advice specific to stock trading. Meanwhile, financial advisors may advise clients on a much wider range of financial strategies. Furthermore, a stockbroker’s salary is based on commission, whereas a financial advisor often works for a direct fee from a client.
How To Know If a Career as a Stockbroker Is Best for You
When deciding whether a career as a stockbroker may be right for you, consider the following:
- Where do you want to work?
- Do you thrive in a fast-paced environment?
- Are you a compelling and convincing conversationalist?
- How good are you at identifying patterns?
- Can you maintain multiple detailed records and keep them organized?
It is important to bear in mind that even if a career as a stockbroker, specifically, is not ideal for you, there are many lucrative and secure careers available within the finance industry.