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What is a 'Stockbroker'

A stockbroker (also known as a registered representative, investment adviser or simply, broker) is a professional individual who executes buy and sell orders on behalf of clients for stocks and other securities in a listed market or over the counter, usually for a fee or commission. Stockbrokers are usually associated with a brokerage firm and handle transactions for retail and institutional customers alike. Brokerage firms and broker-dealers are also sometimes referred to as stockbrokers themselves.

BREAKING DOWN 'Stockbroker'

It used to be that only the wealthy could afford hiring a broker to have access to the stock market. However, advances in technology, such as the internet, gave rise to discount brokers that allowed small investors to trade the stock markets at a small fee. Because of discount brokers, nearly anybody can afford to invest in the stock market, even individuals who are based overseas. A recent development is the introduction of roboadvisers, algorithmic investment management carried out via web or mobile app interface with minimal human interaction, for little to no ongoing cost. One downside to these discount platforms is the lack of personalized service only a dedicated stockbroker can offer.

Educational Requirements

A bachelor's degree in finance or business administration is typically required for stockbrokers. A deep understanding of financial laws and regulations, accounting methods, principles of economics and currency, financial planning and financial forecasting are necessary to ensure success in the field.

Various Country Licensing Requirements

Different countries have different credentialing requirements for stockbrokers. In the United States, registered brokers must hold a minimum of the FINRA Series 7 and Series 63 or 66 licenses, and must be appointed with a registered investment firm. Floor brokers in the U.S. must also be members of the stock exchange where they are housed. In Canada, would-be stockbrokers should be currently employed by a brokerage firm and are required to complete the Canadian Securities Course (CSC), Conduct and Practices Handbook (CPH) and the 90-day Investment Advisor Training Program (IATP). In Hong Kong, applicants have to be working for a licensed brokerage firm and pass three exams with the Hong Kong Securities Institute (HKSI). However, passing all three exams does not guarantee a license because it still has to be approved by the financial regulatory body.

In Singapore, becoming a trading representative requires passing four exams, Modules 1A, 5, 6 and 6A, administered by the Institute of Banking and Finance. A license is applied through the Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX). In the United Kingdom, stockbroking is heavily regulated and brokers must achieve qualifications from the Financial Conduct Authority (FCA). Precise qualifications will always depend on the specific duties required of the broker as well as his employer.

Global credentials are also becoming increasingly popular as signals of legitimacy and financial acumen. Examples include the certified financial planner (CFP) and chartered financial analyst (CFA) designations, among several others.

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