One of the most lucrative professions, next to an investment advisor, is a stockbroker. To become one, obtaining a college degree is not always necessary, but you need to be licensed. In this article, we’ll look into what it takes to become a stockbroker, any special skills a stockbroker requires, and most importantly, how much does a stock broker make? Join us as we find out below.
How much does a stock broker make?
Let’s start with the burning question. How much does a stock broker make? You can’t be told the answer to this question with a simple number.
After completing any required education and becoming licensed, a newly qualified stockbroker doesn’t hold much value for potential investors.
For this reason, most aspiring stockbrokers begin work as trainees or interns for an established brokerage company. The average yearly wage for a trainee stockbroker is between $25,000 and $60,000.
As a stockbroker becomes more experienced and gains a reputation, they also gain value. Successful stockbrokers will build up their portfolio of clients who come to them whenever they want to invest.
As such, an experienced stockbroker will work mainly on commission. They will earn anything from $100,000 to millions of dollars per year.
As you can see, the amount a stockbroker earns depends on many factors, including their time on the job and their skills.
However, even a trainee stockbroker makes a better than average yearly wage, and very successful stockbrokers can almost write their own paychecks.
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What is a Stockbroker
Whenever we think about stockbrokers, the first thing that comes to mind is Leonardo DiCaprio in Wolf of Wall Street or the bustling trading floor in Trading Places. But there is much more to being a successful stockbroker than that.
A stockbroker acts as a middleman, buying and selling securities for their clients (investors). The broker deals with all things related to stock transactions.
Before it happens, investors want to be aware of the risk and ensure their investment. For this reason, the broker prepares market analysis, searches for, and proposes investments for clients, manages portfolios, and stays up to date with rules, regulations, and laws regarding the stock exchange.
With their financial knowledge and skills, successful stockbrokers can easily transition to work as a financial or investment advisor, or they can find a job in a bank or an insurance company.
What does a stockbroker do?
The specific nature of a broker’s job is to execute clients’ orders instantly. It is advisable for a person with a broker’s license to be confident and communicative, especially when working in brokerage offices, where face-to-face meetings with clients will be required.
In the analytical department, on the other hand, a person with mathematical skills will do well. All stockbrokers need to have the ability to stay calm under pressure and have excellent negotiation skills.
A good stockbroker should be familiar with macroeconomics and have an understanding of the mechanisms that govern the operation of the Stock Exchange.
Skills required to become a stockbroker
For anybody thinking of a career as a stockbroker, several vital skills will help along the way. It will be no surprise that math is the first and most important skill. Stockbrokers work with numbers constantly. They will need the ability to calculate percentages and figure out profits and dividends quickly and precisely.
Communication skills are also fundamental. A stockbroker must communicate with clients and potential clients. That is why excellent communication skills are indispensable when building relationships and developing trust.
Especially when working on the trading floor, a stockbroker must be able to make a decision on the spot. Clients’ investments rely on a broker making the correct decision at the right time. A stockbroker must be able to follow market data and know when to buy or sell in an instant.
Some of the most successful stockbrokers are expert negotiators. A stockbroker must be able to negotiate with investors to gain the best commission. The more successful a stockbroker becomes, the less critical negotiation skills are.
What education is required?
Although no specific education is required, most potential stockbrokers will find it difficult to gain employment without some qualifications. In fact, many firms now require that applicants hold at least a bachelor’s college degree. Some only look for candidates that have a master’s degree.
The most popular path to becoming a stockbroker is to study a business or financial degree in college. A degree will vastly improve your chances of obtaining employment from a brokerage house.
The actual broker’s education begins after gaining employment as an intern. Brokerage companies hire promising potential stockbrokers straight out of college.
These companies sponsor employees to become fully licensed stockbrokers. At the same time, they also provide real-world experience and pay exam fees.
While studying in college, many students work as summer interns for brokerage firms or investment banks. Doing this has a couple of benefits. It gives practical experience working in the desired field.
It also can provide students with a foot in the door of a potential employer, should they make a good impression. This is essential as candidates must have a sponsor to take the series 7 license exam.
How to become licensed
Although virtually anyone can become a stockbroker, there are some prerequisites. Becoming a stockbroker requires at least two licenses, although some employers require more. For the first license, the Financial Industry Regulatory Authority (FINRA) requires potential stockbrokers to pass the Series 7 exam.
This is the license that allows stockbrokers to sell most types of securities. It does not allow the license holder to sell real estate, life insurance, or commodities futures. As we mentioned previously, taking the series 7 license exam is only possible if you already have employment.
The subsequently required license is administered by North American Securities Administrators Association (NASAA), known as the Series 63 license. This license and the Series 7 license are required in most states to do business as a stockbroker. The series 63 license is also known as the Uniform Securities Agent License.
To take the Series 7 exam, FINRA requires a clean criminal record. They specifically state that at least ten years must have passed since the date of the felony before potential candidates can take the exams and obtain a brokerage license.
The brokerage licensing exams are considered by many to be difficult, especially since only around 50% of candidates pass them. However, they ensure that potential stockbrokers have the knowledge and ability to handle clients’ investments.
Many people do not prepare carefully for it. In addition, as unbelievable as it sounds, people without basic knowledge of mathematics also take the exam.
Conclusion
How much does a stock broker make? This is undoubtedly a question asked by everybody thinking of entering the profession. However, there is not a clear answer, as most stockbrokers work on a commission-based pay structure after completing an internship.
This means hyper-successful stockbrokers can earn vast amounts of money, whereas inexperienced brokers make far less.
From our research, the average pay for an intern seems to be around $40,000. And for a licensed working stockbroker, the base salary appears to be around $100,000.
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