How to Become a Stock Broker
All right, I’m going to tell you the truth about becoming a stockbroker and the brokerage firms you’d be working for if you decide a career on Wall Street is really right for you.
My name is Bill Allen, and I used to be a stock broker on 2 Wall Street at a NYSE member firm. So when I write about something on the website, I’m telling you from experience.
Not just some text book jargon you’ve most likely seen on other sites and forums around the net that make no sense or don’t really tell you anything useful.
I’ll add as much “real” and honest information as I can to this site.
Information like how much starting brokers as well as the top guys make and what’s realistic for you?
What you’re going to be doing as your “job” on a daily basis.
How to get what’s called a series 7 and your series 63 license, which is a MUST have to work on Wall Street or any other licensed brokerage firm.
How much is a stock broker salary?
What are the differences between a broker, trader, financial adviser, etc…
I’m sure you have a lot of questions, and I have a lot of answers. So let’s get started…
According to Oxford Dictionary, the definition of a stock broker is “A broker who buys and sells securities on a stock exchange on behalf of clients.”
First off, lets talk about the word broker.
A broker is someone who is a go between or the middle man. Meaning they have access to something, and as a stockbroker, the goods are stocks or securities. Both words mean the exact same thing, so I’ll be using them interchangeably on this website.
The broker “brokers” (as in a verb) a trade between the seller of a security and the buyer of a security and receives a commission for their work. A stock broker’s commission can be either a percentage of the total amount of securities for that particular transaction bought and/or sold.
So if the sale is $10,000 a broker may charge up to 5% of the transaction resulting in a $500 fee (which as the broker you usually only get half – more on that later).
Or it can be the “rip” or “spread” that’s created between what the seller’s price is and what the buyer is willing to pay. The difference between the Ask and Buy price is the spread.
This is usually available in stocks that are less traded, IPOs and private placements. But more on salaries in a later article.
“Securities” is just another word for stocks. Hence the governmental task force that oversees stock brokers and stock trading is called the SEC or Securities Exchange Commission.
A stock exchange is simply a marketplace where stocks or securities are bought and sold. The two biggest ones in the USA are the NYSE and the NASDAQ.
NYSE = New York Stock Exchange.
NADAQ = National Association of Securities Dealers Automated Quotations.
When they say “Automated” it means there is no real physical marketplace. Every transaction happens through a computer. The “marketplace” is virtual.
You’ll often see people yelling and throwing up their hands on TV when they show the floor of the NYSE. That’s because for the NYSE there really is a physical marketplace. The actual building is on 11 Wall Street. This is where you see people ringing the bell for the end of the trading day on TV all the time.
And of course the client is the person who is buying the stock.
And the reason a broker even exists is because you need a license, a Series 7 & 63, in order to buy and sell stocks on an exchange. The idea originally was to help facilitate speed in the marketplace and help protect investors.
What do you do everyday!
There’s a big misconception that stockbrokers decide which stocks a client buys.
People have this idea in their head that brokers sit in front of computer screens all day analyzing stocks and mutual funds and looking for great investments for their clients.
This makes for great TV, but often this is not the case at all!
I say often, there are brokers who actually do find their own securities to pitch (sell) you. But it’s not the norm.
Rather, most brokers are usually told what to sell each day by your broker dealer or brokerage firm.
Yes, I have chosen stocks for my clients, but this is usually after you’ve spent some time with your brokerage firm and they trust your judgement. Even then I had to get my picks “approved” by senior staff before I was allowed to pitch them.
So initially at least, you will not have a choice of what to sell. You will be told what stocks to sell. And as a junior stockbroker that’s probably a good thing. Because you’ll have plenty of other things to keep you busy.
Like learning to sell. And you will learn to sell! Or you’ll be out of a job VERY quickly. Period!
That’s really what a broker is. A sales person.
That’s because you get a commission off of every trade you make. The more trades (sales) you do, the more money you make. Plain and simple.
And the best part is you get commissions when you buy your clients any kind of security or mutual fund, and when you sell. Regardless if they make a profit or not!
Now the first thing you really need to understand about being a stock broker is that being a great and making a lot of money have nothing to do with how smart you are or where you went to school.
In fact, there are no requirements as to how much schooling you need in order to get your Series 7 License. Many firms don’t care how much schooling you have while others want you to have a four year degree. It really depends on who you want to work for.
You do however need to pass a pretty intense exam, and I’ll talk more about getting your Series 7 & Series 63 license later.
But if you want to get a head start on your career in the finance industry, I suggest you start learning sales. Yes, LEARN HOW TO SELL BABY! Read books, listen to audios, even go to some seminars.
And just as a side note, it isn’t always best to work for the biggies like Goldman Sachs or Merrill Lynch. Later I will talk about why and when it’s best to work for a smaller firm.
But otherwise, the “secret” to becoming a very rich broker is learning how to sell.
How much money can you make?
A lot! Millions if you’re great.
But don’t count on it. Most people fail within a month or two of starting out.
Although fail isn’t really the correct word. It’s more like give up. Because yes, it takes a lot of work in order to become a stock broker! You WILL test your resolve.
You’ll need to pound the phones for hours upon hours trying to get leads when you first start out. Then you’ll need to memorize your scripts, closes and rebuttals.
For me and most people starting out on Wall Street this meant standing by my desk for 10 to 12 hours everyday except Sunday calling D&Bs trying to get a lead for my senior broker who sponsored me.
Being “sponsored” means that someone is paying me my check out of their own pocket. This can be the firm itself, but more often it is a senior broker. And that means you are an investment to them. And they DO want to see a return on that investment.
So you’ll learn your scripts and rebutles. And you’ll be pounding those phones to get leads. This is just what you do while you study for your exams to get your license.
And it’s valuable training! Don’t get me wrong.
You’ll learn how to get past the “gate keeper” in order to get to the person in charge with the money to do trades with you.
You’ll learn how to be aggressive on the phone and get people to do what you want them to do.
You’ll learn how to get comfortable on the phone and how to handle yourself. You’ll grow your confidence.
And most importantly, you’ll see if you have the stamina it takes to make it as a licensed stockbroker.
All of them are great lessons that’ll be the foundation to your entire career as a stock broker.
Yes, work is involved. A massive amount when you start out. And for very little pay.
I was getting $250 per week as a stock broker trainee. And that was on Wall Street! Let me tell you, $250 doesn’t go far in New York. And some other firms pay even less. Some nothing at all! It all depends who you are working for when you are starting your career.
And just to give you an idea what it’s like, I’ll write about what it was like being a Stock Broker Trainee and what I had to go through in my next article.
All real life. So you can decide without the fluffy pie in the sky dreams whether or not a career as a broker is right for you.