The stock market plays a vital role in national and global finance. Around the world, the market capitalization of all listed domestic companies — businesses with shares listed on a national stock exchange at the end of a year — added up to $93.69 trillion as of 2020, according to the World Bank. These exchanges support broad economic growth and are a key element of modern economies.
By facilitating the trade of stocks, bonds and other securities, stock markets offer businesses the opportunity to raise funds and give individual investors the chance to realize financial gains through shrewd decision-making.
The stock broker 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. To enter this field, aspiring stock brokers generally must complete a bachelor’s degree. In support of career progression, many traders eventually earn a relevant advanced degree, such as the online Master of Business Administration offered by the UAB Collat School of Business.
Keep reading to learn about what it means to have a career as a stock broker, the job outlook and salary information for the profession, critical licensure requirements and the value that an MBA can offer to a stock trader.
The Stock Broker Career: What They Do
Stock brokers 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.
It is absolutely crucial that stock brokers 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 focus on individual investors, working with them to develop a strategy that takes a variety of factors into account. A stock broker 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
Foundational Qualities and Abilities for a Stock Broker Career
It’s clear that a stock broker career 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 stock broker 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.
Floor Brokers
While most modern brokers work from inside offices and trade electronically, a specialized group known as 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 have 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.
Job Outlook and Expected Compensation for Stock Brokers
The stock broker career is a popular option for college graduates who earned a finance degree or business degree, or have completed a program that emphasized topics like economics or accounting.
The Bureau of Labor Statistics (BLS) groups the stock broker 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 466,300 active jobs across the country as of May 2020. While the BLS only predicts 4% growth for the profession through 2030, that adds up to an additional 19,500 projected positions.
Perhaps most important for aspiring professionals, the BLS predicts that approximately 42,500 positions in this field will become available annually through 2030. The enduring and widespread need for brokers and similar professionals means that growth in the total count of positions is secondary to the number available to candidates each year.
Compensation for stock brokers 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 $64,770 as of May 2020. There is significant variation in pay between the median wage and those who are most successful, with the top 10% of professionals in this category earning more than $208,000 a year. 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 lack of a firm guarantee of compensation beyond a modest base salary and benefits offered by an employer.
Certifications and Credentials for a Stock Broker Career
Stock brokers work directly with their clients’ 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 stock broker by a client is substantial.
To that end, stock brokers 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, according to Investopedia. 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.
Let’s take a closer look at the two exams that every aspiring broker must pass, then explore the more advanced options:
- 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 and is a prerequisite for the Series 7 and Series 66 exams. Participants do not need to be associated with a specific company or have a sponsor.
- 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 stock broker.
The Series 63 exam is the final step to licensure and the ability to work as a stock broker. 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.
Educational Requirements for a Stock Broker Career
Along with career-specific certification and licensure, a stock broker 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, there are certain areas of focus that 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.
Stock brokers 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 the online Master of Business Administration offered by the UAB Collat School of Business, 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 stock brokers, 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.
Taking the Next Step in Your Stock Broker Career
Aspiring and current stock brokers have plenty of decisions to make related to their careers. Those can range from choosing a specific undergraduate degree to determining if it’s time to seek out opportunities at other brokerage firms as a full-fledged professional.
Completing the online Master of Business Administration through the UAB Collat School of Business can support career growth and development through a truly exceptional educational experience led by dedicated, full-time faculty. Put yourself in a position to realize benefits like increased earnings and more senior-level roles — get in touch with an enrollment advisor at UAB today.
Recommended Reading
MBA Leadership: How Students Can Build Their Skills Through an MBA Program
Sources
The World Bank, Market Capitalization of Listed Domestic Companies
O*NET OnLine, Securities, Commodities, and Financial Services Sales Agents
BLS, Securities, Commodities, and Financial Services Sales Agents – Work Environment
BLS, Securities, Commodities, and Financial Services Sales Agents
FINRA, Series 7 – General Securities Representative Exam
FINRA, Securities Industry Essentials® (SIE®) Exam
Kaplan Financial, How to Become a Licensed Stockbroker
BLS, How to Become a Securities, Commodities, or Financial Services Sales Agent