The Definitive Guide to a Career in Brokerage Sales

There’s a Lot More to It Than the Movies Portray

Reviewed by Doretha ClemonFact checked by Vikki Velasquez

If you are interested in finance and think that managing other people’s money may be your bag, then you may be cut out to become a stockbroker. Becoming this type of investment consultant isn’t easy, and the process can be quite intense and stressful at times. Still, many individuals coming out of school want to join their ranks. As a result, many people have questions and require greater insight into this alluring career, which now offers more options than have previously been available.

Desire and Skills

Working as a stockbroker sounds like a glamorous career, but the fact is that many first-year brokers drop out of the business because the job usually requires long hours, can be overly stressful, and the business requires a substantial amount of dedication.

Key Takeaways

• Stockbrokers buy and sell investment securities on behalf of their customers.
• There are no specific education requirements for becoming a stockbroker, but many firms require that the applicant holds a college degree.
• The Series 7 and Series 63 licensing exams are required to become a stockbroker.
• While some brokers work at full-service firms and cater to high net worth clients, others work at discount brokers and serve all types of individual investors.
• The ultimate goal of many brokers is to build a clientele, which is their book of business.

While no particular personality traits are required to become a broker, generally speaking, the successful ones have an inner drive to succeed, and they can take rejection. These are important qualities to have, given that most of a broker’s day is likely to be spent on the phone, pitching stock ideas to prospective or existing clients. Other key skills that can come in handy include:

• An ability to sell
• An ability to communicate effectively
• An ability to explain complex ideas without seeming condescending

Although classes and seminars are offered to improve communications ability and salesmanship, that takes time and money. Therefore, it’s usually best if you already possess these skills before entering the field.

Education Requirements

A college education is generally a must these days, as the competition to get into certain firms and training programs can be quite intense. However, it is not unheard of to meet successful salespeople who have no formal training other than studying for the licensing exams.

While there are no formal educational requirements for becoming a broker, (as there are to become a CPA or financial analyst), many firms seek candidates who have at least a bachelor’s degree, preferably focused on some aspect of business or finance; individuals who major in these subjects probably will have a leg up on the competition. In addition, a master’s degree helps a candidate stand out from the crowd, as it implies additional skills in communication and finance that can be helpful on the job.

Licensing Requirements

To become a registered representative—and actually practice—all stockbrokers are required to obtain the same standard securities licenses. One must pass the Series 7 and Series 63 exams administered by the Financial Industry Regulatory Authority (FINRA).  These certifications authorize representatives to buy and sell stocks, bonds, mutual funds, and other types of securities, as well as legally advise their clients.

The Series 7 exam is traditionally taken by beginning brokers. It is a general securities license that enables an individual to sell securities such as stocks, while the Series 63 exam focuses on state laws and regulations.

Would-be brokers should understand that these exams are not easy. In addition, you must be sponsored by a legitimate brokerage to take them, and the firm sponsoring you for the exam expects you to pass.

Many stockbrokers are then required by their employer (or choose) to obtain other licenses as well, such as the Series 3 or Series 31 licenses for commodities and managed futures, a Series 65 or Series 66 to become a Registered Investment Adviser, or a life and/or health insurance license to sell life, disability, and long-term care products, as well as fixed and variable annuity contracts.

It is also becoming increasingly important to pass a strict background check that will examine both the prospective broker’s criminal and financial history. Those with recent bankruptcies, tax liens, or repossessions will likely be discarded from the list of potential candidates just as quickly as those who have been in any type of mentionable legal trouble.

Deciding Between Competing Brokerage Firms

How to get into a sponsoring firm? Be on the lookout for companies that have reputable and structured training programs. These companies can be extremely helpful in teaching certain sales techniques, time-management skills, and the ins and outs of the industry. To find this information, conduct a search on the internet, search job ads, and, more specifically, on the websites of individual firms.

Beyond that, consider firms that match your personality and preferences. For example, as a would-be broker, consider whether you want to work for a large, internationally known financial supermarket or a smaller specialty firm.

Sometimes brokers who start off at larger firms feel like small fish in a seemingly endless pond. However, the downside to a smaller firm is that landing customers or ensuring confidence in your firm might be harder because of its lesser-known name.

Types of Stockbrokers

There are three different kinds of stockbrokers, and which one you become will largely depend on your personal preference, as well as your ability to deftly handle clientele.

Full-Service Broker: Working at a full-service firm or wirehouses such as Bank of America/Merrill Lynch (BAC) or Morgan Stanley (MS) is still the most traditional approach to selling investments. Brokers who work for these firms will be provided with a comprehensive training package that includes sales and product training as well as education in administrative procedures and compliance regulations. They will also typically be provided with office space (or at least a desk), business cards, a guaranteed salary or draw against commission, and a high sales quota that they must meet within a relatively short period of time if they want to remain employed.

Some firms have changed their models and allow their reps longer periods of time with bigger starting salaries so that they have a better chance of succeeding. But a relatively large percentage of each class of trainees will wash out of these programs because they are not able to generate enough business to meet their quotas.

Many successful brokers eventually leave these full-service firms and move on to independent broker-dealers such as Raymond James (RJF) or Linsco Private Ledger. These firms typically offer a wider array of products and services and do not require their reps to sell proprietary products of any kind. They also usually offer much higher payouts on commission than full-service firms, and sometimes a warmer and friendlier atmosphere. However, they are usually only capable of giving back-office administrative support and do not provide amenities such as office space. Those who work for these firms must pay for all of their own expenses and overhead.

Those without prior training or licensure might be wise to start at a full-service firm that will provide these things at no cost; even if this sort of outfit is ultimately where they want to be, they will acquire skills that make them much more marketable when they leave.

Discount Brokers: If you are not a super salesman by nature but would still like to try your hand at managing investments, a discount broker, such as Charles Schwab (SCHW) or Fidelity (FNF) might be the place for you. These firms are geared toward providing effective service for walk-in clients and usually pay their brokers a flat salary (albeit with some minor bonuses or other incentives).

Many brokers who don’t make it at full-service firms end up at discount firms where they have a chance to really learn the business and get a feel for the markets. Some brokers can eventually build up enough of an informal clientele that they can eventually move back to a full-service or independent broker-dealer and make a living there.

Discount brokers are likely to gain a much broader base of experience than many full-service brokers, who generally specialize in certain areas such as IRA rollovers or employee stock options. A rep who works at a firm such as Schwab or Fidelity is expected to be able to provide a broad array of research and services, including basic technical and fundamental analysis, rollovers, stock options, margin accounting, derivatives, bond ladders, mutual funds, closed-end funds, exchange traded funds, partnerships, charitable gifting, 1035 exchanges, and many other areas of investment, retirement, and estate planning.

Reps are often required to perform administrative duties such as cashiering, opening new accounts, processing stock certificates, and other paperwork. But they are not subject to the kind of sales pressure as their full-service counterparts and, generally, have either very low or no production quotas of any kind.

Bank Brokers: Being a broker at a bank is an entirely different proposition than working at Merrill Lynch or Fidelity. Like most discount firms, many banks also look for licensed brokers with previous experience, but the banking system is so unlike the brokerage world that it usually takes newcomers a while to get their bearings.

Brokers who work at banks are full-service brokers in a technical sense, but they are often given a lower payout on their commissions in return for having access to the bank’s customer base. Bank brokerage positions were once viewed as dead-end jobs that were only for brokers who failed elsewhere, but this perception has largely disappeared with the growth of this segment of the brokerage industry.

Most banks and credit unions now employ in-house investment consultants who can offer non-FDIC insured products and services. A growing number of banks also expect their reps to cultivate a clientele from outside the bank, however, and have worked to develop a system that rewards bank employees for referring customers to them as well as some sort of prospecting platform to bring in new business.

Experienced brokers understand that they need to be visible and present to the bank staff and work to educate them on what they do, but also be able to stay out of their way when they get busy with their banking duties. Many of them will invite wholesalers and other product vendors to bring lunch for the staff and then explain how their products can benefit bank customers.

Important

Brokers within a banking environment often have to make an extra effort to get their clients to understand that what they offer—unlike the regular bank accounts—is not insured by the Federal Deposit Insurance Corporation (FDIC).

Bank brokers can also expect to work with a more conservative clientele than they will encounter elsewhere, and many of them rely heavily upon fixed annuities and other low-risk products to build their businesses. But bank brokers usually escape the high sales quotas and pressure to sell products that those who work at other full-service firms face.

Building Clientele

Wherever a fledgling broker lands, the core of their effort is on building a book of business. There are many ways to seek clients, including:

• A phone book and an order to “smile and dial,” which means to make cold calls in order to open accounts.
• A list of pre-qualified prospects from which to start contacting to drum up business (These may be given to you by your firm or bought from marketing firms.)
• Tapping relatives or friends to obtain referrals
• Organization memberships, such as the local chamber of commerce to network and meet prospective clients.

The Bottom Line

There is more opportunity than ever in the financial industry today for those who are willing to work hard and deal with the negatives aspects (long hours, high stress) that accompany the initial stages of a career in the field. The modern stockbroker has several major areas in which to build a business, but must acquire necessary licenses before practicing. This entire process can be a time-consuming and costly adventure, but many find the financial rewards worth the initial struggle.

Read the original article on Investopedia.