Becoming a stockbroker isn't easy. The process can be intense and stressful. Still, many college graduates want to join the ranks. But how can they go about doing that? Is there a defined path? This article addresses these questions and provides insight into this alluring career.
What It Takes to Be a Stockbroker
Being a stockbroker sounds like glamorous work—we have Hollywood movies such as Wall Street and The Wolf of Wall Street to thank for that. But the fact is many first-year brokers end up quitting the business because the job requires long hours and dedication, and can be very stressful. If you are considering entering the profession, first do some soul searching. 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, given that much of a broker's day is spent talking on the phone, writing emails, sending messages and pitching stock ideas to clients. Other neccessary skills are an ability to sell, communicate effectively, and explain to others financial concepts that are sometimes difficult to grasp.
Although classes, online training and seminars can improve communications ability and salesmanship, this 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 Choosing a Profession in the Financial Industry.)
What Type of Education Is Needed?
A college education is generally a must, as the competition to get into certain firms and training programs can be intense. There are no specific majors or degrees that will guarantee you a job, but graduates who majored in finance will probably have a leg up. In addition, a master's degree helps a candidate stand out, as it implies one has learned additional skills in communication and finance.
(You may also want to read Should You Head Back to Business School?)
Finding a Firm That Is a Good Fit
Look for companies that have reputable and structured training programs. These companies can be helpful in teaching sales techniques, time management skills and the ins and outs of the industry.
To find this information, search the internet and the websites of individual firms. You can also go to job sites to get detailed information on openings for trainees and 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, 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 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 October 2018, prospective brokers will also be required to take the new, introductory Securities Industry Essentials (SIE) exam.
Aspiring brokers should understand these exams are not easy, and the brokerage firm sponsoring you for the exam expects you to pass.
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 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 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 required and whether you have the patience and mindset to take on the challenge. 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.)