What Is a Stockbroker?
A stockbroker executes buy and sell orders submitted by investors.Stockbrokers connect the buyers and sellers of stocks, thereby creating liquidity in the market. Stockbrokers trade on behalf of individuals and companies, and for their services, stockbrokers charge a flat fee or a commission, which is a percentage of the sale or purchase price.The growth of discount brokers on the Internet has made it easier for the general public to invest. But stockbrokers provide service and expertise that discount brokers don’t. Stockbrokers go through extensive training to learn about securities, and must also pass rigorous licensing exams, including the Series 7. There are many types of brokers, and other licenses are required to trade specific securities, such as commodities.Stockbrokers advise their clients whether to buy, sell or hold securities. Good stockbrokers thoroughly research any security on which they make recommendations. And they will take the time to learn about a client’s situation to make suitable recommendations. It’s up to individual investors to determine if the fees and commissions they pay a stockbroker, which eat into their returns, is worth the services provided.
Reviewed by Colleen RamosFact checked by Vikki Velasquez
One of the great attractions for many that become stockbrokers, more commonly known as investment advisors, is that there is no such thing as a typical day. In fact, being a stockbroker is essentially the same as being a small business owner. You decide when, how, and who you work with.
How They Gain
While that sounds like a wonderful life of leisure, it usually takes successful brokers five to 10 years to get to that level. The first few years can be especially grueling. During this time, the vast majority of a stockbroker’s energy is put into finding new clients with assets to invest. Since the average stockbroker generates approximately 1% to 1.5% in revenue on their assets under management, and they only get to keep 30% to 40% of that revenue, a new broker may need to find $10,000,000 in new client assets to make $30,000 to $40,000 in their first year.
What They Do
While some stockbrokers get lucky or have great connections, the vast majority of new brokers initially keep a daily schedule that is built heavily around marketing themselves. This means showing up at the office an hour or two before the stock market opens for trading, so they can get all their research done early in the day.
The first few hours of trading are spent contacting their existing clients with recommendations for their portfolio. Following a short lunch, the broker may meet with a few clients or prospects face-to-face, as well as wrap up the day’s paperwork. Then, most new brokers usually end their day by spending two to four early evening hours making cold calls, networking, or teaching seminars to prospective clients. It’s not uncommon for new brokers to spend four to six hours on Saturdays doing some kind of marketing as well.
Read the original article on Investopedia.