A stockbroker is a regulated professional individual, usually associated with a brokerage firm or broker-dealer, who buys and sells stocks and other securities for
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What is a 'Stockbroker'
A stockbroker, also called a Registered Representative, investment advisor or simply, broker, is a professional individual who executes buy and sell orders for stocks and other securities through a stock market, or over the counter, for a fee or commission. Stockbrokers are usually associated with a brokerage firm and handle transactions for retail and institutional customers. Brokerage firms and broker-dealers are also often referred to as stockbrokers.
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. One downside to this 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 requirements for stockbrokers. 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 as 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). The qualifications required depend on the duties required of the broker as well as his employer. In the United States, the designation "Registered Representative" is obtained by passing the General Securities Representative Exam, also known as the "Series 7 exam," offered by the Financial Industry Regulatory Authority (FINRA). Applicants must also be employed with a registered brokerage firm.
If you can handle a fast-paced and challenging financial environment, using your excellent communication, negotiation and analytical skills, working as a stockbroker may be the career for you
Stockbrokers support individuals or institutions (clients) to make informed decisions on investing in the right stocks and markets at the right time.
Depending on the client-base stockbroking can be:
Stockbrokers can also operate in a number of ways:
In all cases, you will deal directly with your clients and manage their wealth portfolios. Stockbrokers are expected to manage existing clients and develop new business.
Types of stockbrokers
Responsibilities
As a stockbroker, you'll need to:
It's likely that you'll work on commission and it's very important that you remember your fiduciary duty towards all your clients, which means that clients have placed the utmost trust and confidence in you to manage and protect their money and investments.
Salary
Salaries can vary based on experience, qualifications and the length of service within the brokerage firm and the type of firm that you work for.
The sector also offers bonuses for reaching specific targets. Other benefits may include health and travel insurance, private medical coverage, gym membership, travel expenses, professional body membership fees, tuition and exam fees and study leave.
Income figures are intended as a guide only.
Working hours
You can expect to work long days, with a typical day lasting from 6:30am to 6:00pm. This is to cover the world's financial markets as they open.
You are likely to work unsociable hours in order to establish contacts with your clients in different time zones. Some companies will require you to travel abroad and you might be absent from home for a couple of nights a week on a regular basis.
Weekend work might occur, while part-time work is rare. Self-employment is possible.
What to expect
Qualifications
Most employers will be searching for candidates with good undergraduate degrees. You may have an advantage if your first degree is in:
Entry at junior level is available for newly qualified undergraduates.
A higher degree like a Masters of Business Administration (MBA) can increase your chances of securing a more senior position. Search for MBA courses.
Professional qualifications can greatly improve your employment prospects. These include:
To gain an advantage many people decide to obtain the first level of CFA qualification before applying for jobs.
Previous sales experience can also increase your chances of getting a job, as can a working knowledge of a foreign language.
Following a successful online application, you will need to pass a further two to three interviews.
Interviews might take the form of a presentation and questions afterwards. Large banks run their assessment centres to shortlist candidates before the final interview stage.
Skills
You will need to demonstrate:
Work experience
Work experience in sales and customer-facing roles is an advantage. Experience in stockbroking is not necessary as many firms offer the necessary training.
Internships and placements offered by the major players can certainly bring you up to speed with the current trends in the market and its jargon. Getting a relevant internship in your first or second year of university is critical; it is very hard to get an interview without that experience.
You can get in touch with the department in your university responsible for sourcing internships and placements, however information of current opportunities is available from individual company websites.
Employers
The majority of employers are based in the City (of London) and vary from large investment banks to small boutique brokerages.
Firms adhere to a set of standards, specified by the Financial Conduct Authority (FCA).
Information about the firms can be checked on:
National newspapers publish various top lists of firms in the city.
Look for job vacancies at:
Networking and personal contacts give you an advantage in identifying new opportunities and often secure you the first interviews.
Competition for available vacancies is strong, but so is the turnover with many people finding it difficult to achieve the required sales targets.
Professional development
All UK stockbrokers must be regulated by the FCA.
Additional qualifications related to the job and considered part of continual professional development (CPD) include:
If you haven't obtained some of the professional qualifications previously mentioned, you will be expected to undertake those. Many firms will offer to pay for the course and the exams, give you time off to study and later fund your professional body membership.
In addition, employers run workshops and seminars as part of on-the-job training. The workshops cover various topics, relevant to the job like financial markets and changes in legislation.
There are also various events and conferences organised by firms, which provide opportunities for networking.
Career prospects
Successful stockbrokers can build up a broad network, which might enable them to subsequently set up their own firm or to become a partner within their existing employment.
A partner will deal with a client base consisting of higher net worth clients, which attracts greater prestige and rewards.
Some stockbrokers, less able to deliver sales targets, may move sideways to become investment analysts.