Becoming a stockbroker isn't easy, and the process can be quite intense and stressful at times. Still, many individuals coming out of school want to join the ranks. But how can they go about doing that? Is there a defined path that one should follow?
This article addresses those questions and provides greater insight into this alluring career.
What It Takes to Be a Stockbroker
Being a stockbroker sounds like glamorous work — we have Hollywood movies like Wall Street to thank for that. But the fact is that many first-year brokers end up dropping out of the business because the job usually leads to long hours, can be very stressful and requires a large amount of dedication. If you are considering entering the profession, you should first do some soul searching and try to determine whether you have the desire and patience to do what it takes to be successful.
While no particular personality traits are required to become a broker, generally speaking, successful registered representatives have an inner drive to succeed. They also make their days productive, and can take rejection. These are important qualities to have, given that most of a broker's day is likely to be spent talking on the phone, writing emails, sending messages and pitching stock ideas to prospective or existing clients.
Other key skills that can come in handy are an ability to sell, effectively communicate, and explain to others financial concepts that are sometimes hard to grasp.
Although classes, online training and seminars are offered to improve communications ability and salesmanship, that often takes time and money. Therefore, it's usually best if you already possess these skills before entering the field.
(To figure out where you'd fit in the financial world, check out Finding Your Place in the Financial Industry.)
What Type of Education Is Needed?
A college education is generally a must these days, as the competition to get into certain firms and training programs can be quite intense.
There are no specific types of majors or degrees that will guarantee you a job, but individuals who majored in finance probably will have a leg up on the competition. In addition, a master's degree helps the candidate stand out from the crowd, as it implies that the candidate has learned additional skills in communication and finance that can be helpful on the job.
(You may also want to read Should You Head Back to Business School?)
Finding a Firm That Is a Good Fit
Be on the lookout for companies that have reputable and structured training programs. These companies can be extremely helpful in teaching certain sales techniques, time management skills and the ins and outs of the industry.
To find this information, conduct a search on the internet and, more specifically, on the websites of individual firms. You can also go directly to any number of the online job sites to get detailed information on openings for trainees and the associated training programs.
Beyond that, consider firms that match well your personality and preferences. For example, as a would-be broker, consider whether you want to work for a large, internationally-known firm or a smaller firm.
Sometimes brokers who start off at larger firms feel like small fish in a very large pond. Additionally, small regional broker-dealers might provide a higher commission rate, with a warmer and friendlier cultural atmosphere. However, the downside to a smaller firm is that landing customers or ensuring confidence in your firm might be harder because of its lesser-known name.
(For tips on getting accepted into the training program you want, read Get Into a Broker Training Program.)
Taking the Series 7 and 63 Exams
Even if you are hired by a firm and you have the desire, there is no guarantee you will become a fully functioning stockbroker - to do that, you must first pass specific exams:
- The Series 7 exam is traditionally taken by beginning brokers. It is a general securities license that enables an individual to sell securities such as stocks.
- The Series 63 exam focuses on state laws and regulations.
- Starting in October of 2018, prospective brokers will also be required to take the new, introductory Securities Industry Essentials (SIE) exam.
Would-be brokers should understand that these exams are not easy, and the brokerage firm sponsoring you for the exam expects you to pass it.
(Need help passing the exams? Our Series 7 and Series 63 exam guides have the information you need.)
How to Build a Client Base
Just because you may have passed the exams and officially become a stockbroker doesn't mean that you can sit back and relax. On the contrary, this means that your work is just beginning. You now must focus on building a book of business.
There are many ways to seek out new clients. Some of them include:
- Accessing a phone database and beginning to "smile and dial," which means to make cold calls in order to open accounts.
- Reaching out to a list of pre-qualified prospects to start contacting to drum up business. These may be provided by your firm or bought from marketing firms.
- Tapping relatives or friends to obtain referrals.
- Leveraging organization memberships, such as the local chamber of commerce in order to network and meet prospective clients.
(Read Targeting Ideal Customers to learn why the wealthiest clients might not always be the most lucrative.)
The Bottom Line
This entire process can be a very time-consuming and costly adventure. As a would-be broker, consider the effort that must be put forth and whether you have the patience and mindset to take on something like this. Keep in mind the time and effort it takes to attain such a position. If you are lucky or motivated enough to possess the necessary aptitude, take heart — although it isn't for everyone, being a stockbroker can be a very rewarding job.
(For more, read Preparing for a Career as a Broker or Trader.)