If you're looking to become a stock broker, choosing the right firm will be an extremely important decision in your career. The firm you work for should not only fit your personality and work habits, but also your investment philosophy. To that end, below are several factors potential brokers or those with newly-minted Series 7 licenses should consider before building a book of business at any firm.

SEE: Banker Or Broker: Which Career Is Right For You?

Corporate Culture
When it comes to corporate culture, you should consider everything from the dress code at work to the frequency of mandatory meetings and in-house education, to the types of accounts you'll be allowed to open. At larger, big-name investment banks such as Goldman Sachs or Morgan Stanley, the dress code will be quite formal. These larger banks also tend to emphasize sales meetings and continuing education sessions over and above mandatory FINRA requirements. Many also have minimum sales targets that you'll have to meet if you want to stay in their broker trainee programs.

On the other hand, smaller, more regional firms are a little more flexible. To be sure, they also expect their sales staff to be very professional, but they aren't likely to be as strict as the bigger name banks in terms of broker appearance or sales meetings. In addition, they are more apt to allow mom-and-pop type accounts, whereas the bigger houses may ask you to target only high net worth customers with $1 million or more in investable assets.

Compensation and Prospecting Requirements
A broker has a much better chance at opening a new account at a larger firm due to name recognition. However, because of the overhead attached to this name recognition (including the maintenance of sales offices, marketing budgets and a research staff) the commission payouts are often lower than those of the smaller firms. On the flip side, smaller firms, like the ones found on most main streets in America, can often offer higher commission rates to their brokers.

As far as prospecting is concerned, at firms like Merrill Lynch and JP Morgan, you will probably have to "smile and dial." In other words, you'll be expected to hit the phones hard as you build your book. Smaller firms, on the other hand, focus more on networking, and holding investment seminars to obtain prospects. Building up a clientele is a must, so it's up to you to decide how you'd prefer to do it and which firms fit in with you sales style.

Investment Types and Options
Large investment firms like to see their brokers put a certain percentage of their books of business into different types of investments. So, in some cases, brokers may find themselves buying Treasury notes or corporate bonds for some of their clients, whether they like it or not. Sometimes, this happens because the investment firm is underwriting these deals. Smaller firms tend to be more flexible and usually allow for an asset allocation spread across different types of equities or other suitable investments. They also tend to be less focused on building out corporate or government bond positions merely to garner investment banking business. Another thing to consider is that larger firms are also notorious for pushing stocks their research staff recommends, while smaller firms sometimes allow their brokers to do their own research.

SEE: Research Report Red Flags

The ability to obtain initial public offerings (IPOs) should be another important factor in your decision. Small firms, who don't do any underwriting, usually don't have access to initial stock offerings. On the other hand, the big banks often get the first crack at offerings, and their brokers are often given an allotment to sell to their clients.

To be clear, IPOs aren't appropriate for all investors. In fact, many brokers build a huge book of business without ever having access to an initial offering. However, it can be helpful for brokers to have this tool under their belts. After all, the ability to obtain shares in an IPO is extremely attractive to clients, and will help registered reps garner new clients.

Are Your Clients Really Yours?
At most brokerage firms, the client accounts that you open belong to the firm. In other words, if you leave, or if you are fired, the company keeps those accounts. Furthermore, as part of your initial employment contract, you probably will have to sign a document that forbids you to contact any of those clients for a given period of time, even after you have separated from the firm. Some large firms also have a reputation for pushing out aging brokers and keeping their accounts. Although this may not be commonplace, it is something you should be aware of.

Smaller mom-and-pop firms may allow you to keep your clients if you leave and their employment contracts probably won't be as strict. This means that even if the mom-and-pop firms don't let you keep your clients upon separation, they may not forbid you from contacting them down the road. That's a biggie!

The Bottom Line
There are many factors to consider if you want to get into the stock brokering business. Before you accept a long-term position at a firm, be sure to do your homework. You'll be glad you did!

Related Articles
  1. Professionals

    Banker Or Broker: Which Career Is Right For You?

    Bankers and stock brokers may share similar traits, but there are many differences between the two professions.
  2. Professionals

    Dealing With 10 Coworker Personality Conflicts

    The financial world is filled with dysfunctional workers; find out if you're one of them and what you can do about it.
  3. Options & Futures

    Find Your Niche In The Financial Industry

    In this article, we'll give you the tools you need to discover the financial career that fits you the best.
  4. Professionals

    Taking The Lead In The Interview Dance

    Learn the steps that will help lead you to a new career.
  5. Retirement

    Financial Career Shift: Get In The Driver's Seat

    Before you agree to work for another investment firm, be sure you know what you're getting into.
  6. Executive Compensation

    How Restricted Stocks and RSUs Are Taxed

    Many firms pay a portion of their employees’ compensation in the form of restricted stock or restricted stock units.
  7. Economics

    What Does Triage Mean?

    The term triage refers to the practice of prioritizing work or customers into different levels so that the most urgent issues are handled first.
  8. Economics

    What Does the Back Office Do?

    A financial services company’s back office provides administrative and personnel support.
  9. Economics

    How Leadership Impacts Investments

    Investors often overlook a company’s leadership when evaluating an opportunity, but it’s an important quality to consider.
  10. Professionals

    The Path To Becoming A CEO

    Think you have what it takes to be chief executive? Find out what those at the top have in common.
  1. How do you conduct effective social responsibility training?

    One way to provide employees with effective social responsibility training is to base training sessions on resources offered ... Read Full Answer >>
  2. Why is social responsibility important to a business?

    Social responsibility is important to a business because it demonstrates to both consumers and the media that the company ... Read Full Answer >>
  3. How important are business ethics in running a profitable business?

    A number of factors play a part in making a business profitable, including expert management teams, dedicated and productive ... Read Full Answer >>
  4. What advice does Howard Schultz offer would-be business moguls?

    Starbucks CEO, billionaire and former sports tycoon Howard Schultz has several pieces of advice for would-be moguls and, ... Read Full Answer >>
  5. How does brand image and marketing affect market share?

    A company's marketing efforts have a direct impact on sales and market share, but they are not the only factors that influence ... Read Full Answer >>
  6. What is Tim Cook's managerial style? (AAPL)

    Tim Cook's managerial style could be broadly defined as democratic. Rather than standing in complete contrast to former Apple ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center