Trading stocks can be quite a challenge for some people, especially for beginners.
There are a lot of factors to consider when choosing an asset, many of which might not seem obvious at all, or you’d just simply omit them. Or maybe you just 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 capitals 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, taking into account all the necessary factors.
They are much like financial advisors in terms of personalizing the deals to their clients, but Stockbrokers are specialists in stock trading, whereas 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 an average, and it really shouldn’t be stated that way. In order to fully understand how much money can a stockbroker make, you need to understand the process that it takes to earn as a stockbroker.
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 Stockbrokers 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 a lot of 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.
Discount brokers, on the other hand, 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. I covered them in our other article about trading stocks at home.
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.
As Licensed professionals, educated in their field, they 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 amounts of money you wish to invest.
How does one become a stockbroker?
Although technically no formal education is required to become a stockbroker, it’s highly unlikely 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 the advantage of an internship. This greatly improves the chances of being hired post-license and provides a great amount of training that is usually required by big companies.
You’ll also need to pass license exams, namely (in the U.S.) Series 7 and Series 67, plus some additional ones if needed.
In order 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.
Acoording 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. You need to be up to date with any stock movements and fluctuations.
You need to know your craft, be good at what you do, and know a lot of 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.
They provide advice and guidance to trading, taking everything into account, including clients’ needs and possibilities.
Profit generally outweighs the commission so it’s generally worth hiring a stockbroker to handle your trades.
Being a stockbroker not only requires a great bit of education but also great risk management, market analysis, and you need to be able to handle stress pretty well.