What Stockbrokers Do and How to Become One

With the Rise of Online Trading, Should You Become a Stockbroker?

Woman working as a stockbroker
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The lifestyle of a stockbroker seems glamorous and a little wild. Films like The Wolf of Wall Street and Boiler Room have made the job seem lucrative but risky.

Fiction doesn't really depict what work is like for most brokers. It can be a fulfilling career field if you're the right kind of person. Before you jump into a career in the stock market with both feet, you need to learn more about what this job entails.

What Is a Stockbroker?

Stockbrokers are, for the most part, middlemen. Stocks are bought and sold through stock markets such as the New York Stock Exchange and NASDAQ, and most people who want to trade stocks need brokers to make trades on their behalf.

While it hasn't always been the case, making stock trades happen for individual investors is most often carried out electronically by discount firms such as Fidelity, TD Ameritrade, E-Trade, or Charles Schwab. But human brokers still handle many trades, especially those for large institutional investors.

Stockbrokers know the markets and can offer advice on the best times to buy and sell. It is their job to find clients the best prices possible. In exchange for making trades and giving advice to clients, a broker gets a commission in the form of a flat fee or percentage of the value of the transaction.

In the age of online trading, there is less demand for brokers. But there are still many times when an investor wants to work with a broker to execute a stock trade. For example, they may want to ensure that the stock sale happens at a specific price, or they have many trades they’d like to happen in a specific order.

Stockbroker Pros and Cons

The job of a stockbroker is not without its ups and downs. Here are some of the pros and cons:

Pros
  • Great career option for people who have in-depth knowledge of the stock market.

  • Offers the potential to earn a high income.

  • Good fit for ambitious people with strong selling skills.

Cons
  • Must be able to handle rejection and stress.

  • Competitive work environment.

  • May require excessively long work hours.

  • May have a hard time building a client base due to the rise of online trading.

How to Become a Stockbroker

While there are no specific schooling requirements for becoming a stockbroker, certain degrees or coursework can give you an advantage in the job.

Education

You might want to consider a bachelor's degree in business. Many stockbrokers also have a master's in business administration (MBA) or a master's in finance. It also helps if you have some education in math, statistics, and analysis.

Experience

Stockbrokers often start working for a firm or bank in a role other than broker. Some even begin as college interns. That is where they gain know-how while they are on the job. To become a broker, they must show a deep understanding of money markets, laws, rules, and accounting practices.

Exams

Brokers need to pass the General Securities Representative Exam, commonly known as the "Series 7" exam, administered by the Financial Industry Regulatory Authority (FINRA). To take the exam, a person must be sponsored by a FINRA member firm or a member of a similar self-regulatory organization (SRO).

The Series 7 exam is hard and consists of 125 multiple-choice questions that must be finished in 225 minutes. It must be combined with a separate Securities Industry Essentials Exam, which consists of 75 questions and lasts 105 minutes.

These exams will permit a broker to buy and sell most securities, but there may be other exams required to trade certain things. For example, someone who wants to buy and sell municipal bonds may have to take the Series 53 exam. There are also other required exams, including the Series 66 and Series 63 exams, to be registered in various states.

Work Environment

To make it as a successful stockbroker, you'll need to work long hours, especially at the start, when you're building your pipeline or list of clients. The job consists of giving clients advice and requires a strong ability to sell, since you'll earn your pay through commissions.

If you connect well with people, can build rapport easily, and handle rejection well, you'll have a good chance of winning new clients. The job tends to be very competitive, since one broker can help a client buy stock as easily as any other one can.

The U.S. Bureau of Labor Statistics predicts that jobs for brokers will grow at an average pace from 2019 to 2029. While the field isn't growing by leaps and bounds, it's also not shrinking.

Online Discount Brokerages

It was once unheard of to invest in stocks without going through a human broker, but now most investors can buy and sell stocks and manage their own stock accounts. Discount firms allow people to trade stocks using an online platform, usually for less than $10 per trade.

Discount brokerages have broken down barriers and lowered the cost of buying and selling stocks for most people. Trading stocks is no longer just for the wealthy. This is not to say that brokers can’t provide a helpful service. They can help make complicated trades happen and provide expert advice to people who want to invest money. If you’re an average investor who simply wants to purchase 20 shares of a well-known company, a human broker isn’t needed. You can do it all online.

Job Prospects

Some people and institutions will always need help to buy and sell stocks. Millions of stocks and other securities trade on the New York Stock Exchange alone every day, and not all trades are done using computers.

The number of brokers has declined. FINRA reported 624,996 registered representatives in 2019, down from a high of 672,688 in 2007.

The need for skilled, smart, trusted brokers won't go away soon, so this is a fine choice if you are still sold on it and willing to put in the work to make it happen.

Article Sources

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  2. Indeed. “Learn About Being a Stockbroker.” Accessed May 22, 2021.

  3. Nasdaq. “Death of a Stockbroker.” Accessed May 22, 2021.

  4. The Princeton Review. “Stockbroker.” Accessed May 22, 2021.

  5. Indeed. “Everything You Need to Know About Becoming a Stockbroker.” Accessed May 22, 2021.

  6. FINRA. “Enroll for a FINRA Exam.” Accessed May 22, 2021.

  7. FINRA. “Securities Industry Essentials (SIE) Exam.” Accessed May 22, 2021.

  8. FINRA. "Series 7 – General Securities Representative Exam." Accessed May 28, 2020.

  9. FINRA. "Series 53 – Municipal Securities Principal Exam." Accessed May 28, 2020.

  10. FINRA. “Series 63 – Uniform Securities Agent State Law Exam.” Accessed May 28, 2020.

  11. FINRA. "Series 66 – Uniform Combined State Law Exam." Accessed May 22, 2021.

  12. U.S. Bureau of Labor Statistics. "Securities, Commodities, and Financial Services Sales Agents." Accessed May 22, 2021.

  13. Fidelity. “Commissions, Margin Rates, and Fees.” Accessed May 22, 2021.

  14. Charles Schwab. “We Believe Price Should Not Be a Barrier to Pursuing Your Goals.” Accessed May 22, 2021.

  15. FINRA. "Statistics." Accessed May 22, 2021.