Trading stocks can be quite a challenge for some people, especially for beginners.
There are many factors to consider when choosing an asset, many of which might not seem obvious at all, or you’d omit them. Or maybe you can’t make up your mind as to what to invest in? You could, of course, use the help of a financial advisor, but there’s a better option: Stock Brokers.
Who is a stockbroker?
A stockbroker is a professional in the field of trading capital and assets. They are people who connect sellers and buyers and operate on buyers’ behalf. A Stockbroker conducts research based on the client’s needs and finds the best asset to stock to invest in, considering all the necessary factors.
They are much like financial advisors to personalise the deals to their clients, but Stockbrokers are specialists in stock trading. In contrast, financial advisors are more general, covering the investments overall. You can find out more about financial advisors here.
Brokerage firms are sometimes called stockbrokers. However, they are different from them. They are commonly referenced to as discount brokers. A discount broker does not provide investment advice or analysis based on a client’s needs, while a full-service broker does.
Please note that BLS (The Bureau of Labor Statistics) refers to stockbrokers as securities, commodities, and financial services sales agents.
How much money do Stockbrokers make?
Stockbrokers make, on average, around $70.000 – $80.000 a year, according to the U.S. Bureau of Labor Statistics.
Top professional stockbrokers make up to over $200.000/year, with certain exceptions.
However, this amount is average, and it really shouldn’t be stated that way. To fully understand how much money a stockbroker makes, you need to understand the process it takes to earn as a stockbroker.
The job of a stockbroker can pay very well, but there are plenty of broker fees that the average person doesn’t know about. A good way to make money in this profession is to have stocks pay dividends.
A Stockbroker job salary is not like most other jobs. It really depends on how good your performance is, and what your personal effort is in this career. Most brokers pay their own broker fees from commissions, but some are paid by their brokerage firm.
According to Payscale, the stockbrokers’ wages (the total pay) are in the range of $42k-$191k a year and are influenced by location/city, experience, skills, and employers. In the next table, you can observe how much money do stockbrokers make (the average stock broker salary) based on their location and experience:
|Location / City||Average||Entry Level||Early Career||Mid Career||Experienced|
|New York, New York||84k||50k||80k||98k||103k|
|Los Angeles, CA||139k|
|San Francisco, CA||98k|
|St. Louis, MO||42k||44k|
How do Stock brokers make their money?
Stockbrokers earn their income based on fees and commissions.
It can either be a flat amount fee on each sale or a percentage commission on every trade they lead to a close.
The standard commissions range from 1% to 2% for a Full-Service broker.
For instance, When a client chooses to trade with a broker when purchasing the shares, the broker adds the fee to the total amount, and the client pays a little bit extra.
Although this might not seem like a lot at first glance, bear in mind that stockbrokers deal with many clients at the same time, and oftentimes clients trade with large sums of money, meaning that the 2% commission translates to $2.000 in some cases.
On the other hand, discount brokers usually charge a flat fee ranging from $5 to $30.
What is the difference between Discount brokers and full-service brokers?
Discount brokers are cheaper as they perform fewer actions. They allow you to trade stocks easily, although they do not provide advice and guidance when choosing an asset.
Usually, discount brokers are companies that allow you to open an online trading account and trade on your own from home, charging a small fee on transactions. The account maintenance fee is usually around 0.5%, but it all depends on the company.
There are exceptions to this, and I covered them in our other article about trading stocks at home.
When you’re shopping for a stock broker to help you invest your money, it’s important to understand the difference between discount brokers and full-service brokers. Full-service stock brokers are like the general practitioners of finance that offer clients advice on everything from retirement plans to savings options.
They have access to research, analysis, and professional guidance in all aspects of investing. If this sounds like what you need, then these types of brokers are perfect for you! However, if you want more freedom in choosing investments with lower fees or don’t need as much hand-holding, then a discount broker is probably right for you.
Discount brokerage firms charge less than traditional investment advisors because they do not provide comprehensive financial services, which can include:
- asset management
- portfolio management
- stock-picking assistance
- tax planning
- estate planning.
Discount brokers offer you various investment services such as trade execution, research, market data, education, and access to the stock exchange that full-service firms typically provide. Some brokers also sell insurance products along with providing stock brokerage services.
Is it worth trading with a broker?
Short answer? Yes.
Unless you’re trading small amounts of money or penny stocks, it’s usually worth it to hire a full-service stockbroker.
Licensed professionals, educated in their field, help you make sure you choose a good asset to invest your money in, and most of the time, this ends up with you profiting from transactions. The commission they charge is oftentimes less than actual profit, so you still come out on top.
Stockbrokers can save you a lot of headaches when it comes to trading. Their help and guidance make choosing stocks less risky, as they know their craft very well and can predict hiccups before they occur.
Trading is a huge risk, so unless you’re a pro yourself, why don’t you minimalize the risk by hiring a broker and sharing a small fraction of the prize? It all comes down to your decisions and the amount of money you wish to invest.
How does one become a stock broker?
Although technically, no formal education is required to become a stockbroker, it’s improbable that one does so without a bachelor’s degree.
Bachelor’s degree is required in commodities, securities, and financial services sales positions.
If you want to be a broker at a company or a bank, you also need to have a degree.
It isn’t stated what fields you need to have a degree in, but anything related to finance and investments (namely, business) will do the job. After all, it all comes down to people willing to hire you, and who would hire a broker with a degree in nanotechnology?
After getting a degree, it’s a good idea to take advantage of an internship. This greatly improves the chances of being hired post-license and provides a great amount of training that big companies usually require.
You’ll also need to pass license exams, namely (in the U.S.) Series 7 and Series 67, plus some additional ones if needed.
To do so, you’ll need a sponsor by a FINRA registered company or other authority. This usually implies being hired by an investment bank or a brokerage firm before getting licensed.
After license, you’re pretty much good to go; however, it’s a good idea to stay educated and up to date with everything in the business through some courses and training. This might greatly improve your chances of employment.
According to BLS, in 2019 were 464.200 jobs available for stockbrokers (Securities, Commodities, and Financial Services Sales Agents).
What does it take to be a stockbroker?
It takes a huge gut. You need to be able to handle stress and risk really well, as you’ll be working with those things at all times. It would help if you were up to date with any stock movements and fluctuations.
You need to know your craft, be good at what you do, and know many things you acquire through formal education and training.
Being a stockbroker is all about your risk management skills and market analysis. Your goal is to make your client the most money so that your commission is as high as possible.
Stockbrokers are pros at trading stocks and analyzing risks. They help their client make the best trade and make them the most money as they charge a commission of the trade’s value. These professionals provide advice and guidance to trading, taking everything into account, including clients’ needs and possibilities.
Being a stockbroker requires a great bit of education and great risk management, market analysis, and you need to be able to handle stress pretty well. A typical salary ranges from $60k-$200k depending on experience level and location.
The profit generally outweighs the commission, so it’s generally worth hiring a stockbroker to handle your trades.
Stockbrokers sell stocks and provide information to the stock market. They sell for a commission, which is usually small if they sell a high volume of stocks that are worth more than $2 million dollars. If it’s lower than that, the brokerage fee can be fairly high.
Stockbrokers sell stocks from big corporations to clientele and then sell the stock for them. This profession requires strong communication skills as well, because stock brokers constantly work with clients over the phone or in person, explaining their trades and helping their clients make money at investing. Stockbrokers always have up-to-date knowledge of the stock market and the availability of stocks.