Is Being a Broker the Path to Riches?
A stock broker’s salary depends on a lot of different factors. Even luck seems to play a role. But here are a few things you can ask yourself to see if you might make a ton of cash as a broker.
Can you stay for the long haul?
Stock broker salaries depend a lot on how long you’ve been a stock broker.
It’s simple math. The longer you are in the business, “hopefully” the more clients you gain over time. More clients equals earning more money. Usually anyway.
How hard are you willing to work?
If you think you’ll be working 9 – 5 and just collecting huge checks for making a few phone calls, you need to re-evaluate what you think this job entails. I’d easily put in 12+ hours, six and sometimes seven days a week.
How much time can you put in? Do you have a family?
Want to loose a girlfriend or wife fast? Become a stockbroker. Seriously, the stress and hours put a toll on not only you, but your entire family. If someone tells you it’s easy, they’re lying to you.
When you first start out in your career, you’ll most likely begin as a broker trainee. That means you’re bringing into the company leads, not sales. So obviously you’re not going to be getting paid a lot of money.
This is when you’re learning the basics of cold calling and conducting yourself on the phone.
During this time you’re usually paid a very small salary, and sometimes you’re not even paid a dime.
I was getting a $250 a week pay check when I first started out. And this was from a NYSE member firm on 2 Wall Street. Just because it’s a big firm doesn’t mean your salary will be big too.
And mind you, I was working like 12 hours a day six and sometimes even seven days a week!
So you obviously make nothing until you get your license and your own “book”.
But of course as your career progresses, so should your pay.
Average Stock Broker Salary
According to the U.S. Bureau of Labor Statistics, the median annual salary is $71,720 or $34.48 per hour.
But of course “median” means average salary. So a stock broker trainee salary is peanuts really. And that also means if just a few guys on Wall Street are making millions, that of course brings up the whole average amount that the US Bureau of Labor statistics is giving. (Not to mention any kind of tax fraud)
I would personally put that average stockbroker salary at around $50,000 per year or less. And I would further “guesstimate” that less than 30% of all stockbrokers make that amount of money. The rest I believe is less.
How to Bump Up Your Salary?
One of the best ways for a stockbroker to make a lot of money is to put their clients into what’s called an IPO.
IPO stands for initial public offering.
This is when a stock first becomes publicly treated on an exchange. Or when people can buy or sell shares of the stock. Before the IPO there is no liquidity in the securities, or no way to buy or sell the stock.
IPOs are great for brokers because usually you get a piece of the “rip”.
The rip is the price between the buy price and the sell price of the security. When it’s an IPO, sometimes you can get one or two dollars a share when you sell the stock.
Not to mention most clients LOVE IPOs because of the potential profit they can make after the stock shares go public.
So that means if you sell a thousand shares with a “rip” of $1, your commission should be $1000. Not bad, right?
Another way to make more money as a stockbroker is to have junior brokers working under you.
One of the things most trainees need to do in order to go on their own and get their own book is to open a certain number of accounts for the broker who sponsored them.
So for a brand-new broker and one being sponsored by an established broker, the senior broker will pay my salary, train me, and do everything he can to help me be successful. Because in the end if I’m successful he is successful.
But in order for me to pay back his tutelage, I usually have to open a certain number of new accounts for him. And of course by account I mean give him new clients.
I remember having a job interview with a broker in Oppenheimer and he wanted me to open 50 accounts for him. Plus get my own leads.
Let’s just say I didn’t work there 🙂
For the firm I did end up signing with I had to open up 25 accounts. Very reasonable I think.
And yes, I think it’s fair.
Another way to make more money is to expand the range of products you are able to sell.
If you already have your series 7 and series 63, then you can take it a step further and get your financial planner licenses well.
Then of course you could always go for a bond licenses too. Or a host of other licenses that can allow you to have more inventory or options for both your existing and new clients.
When you finally become your own licensed stockbroker and have your own book, that’s when you obviously be making the most amount of money.
Now by “”book””, I just mean your list of clients. It’s is what we call it on Wall Street.
But when you do have your own book and you’re working for a firm, you have to remember they need to make money too.
Your broker dealer is paying for your office space, furniture, telephone, leads, etc…
So what most brokerage firms do is split your commissions.
The split is usually a 50-50 split. But of course the more money you’re making the company and the bigger your client list or book, the better you can negotiate a better percentage for yourself.
But for your first few years, you need to understand that whatever commissions you actually make you are going to be giving half of that to the brokerage firm that you are licensed with. That’s just the way it is.
Hopefully you’ll be one of the lucky ones and make $1 million in your first year. I would exactly count on it, but it is totally possible. There’s not too many other jobs that where you can say the same thing.
Like I’ve stated before, being a stockbroker is mostly sales. And salespeople still make the most amount of money per year than any other career path.
So if you think you have what it takes to work on Wall Street, go for it!
It’s an amazing career choice with a lot of roller coaster rides. And depending if your on an incline or a decline, it can be one of the most rewarding jobs in the world war one of the most stressful and unforgiving jobs in the world.
It’s totally up to you.