Career Testing
Career Testing
Career Testing
CAREER DEVELOPMENT / DEC. 20, 2016
version 5, draft 5

How to Become a Stockbroker

stockbroker holding graph
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They have been glorified and vilified in films and T.V. Most recently we saw a movie about one its most infamous representatives, Jordan Belfort, played by Leonardo Di Caprio in Wolf Of Wall Street. In reality, though, the life of stockbroker involves long hours and high levels of responsibility. But, if you have a talent for numbers and seeing patterns and want the respect that comes with affluence, then this might be the perfect job for you.

Although a mind for maths might be an important component of finance, being adaptable, quick-witted and trustworthy is also critical. Since you will be dealing with large amounts of money, honesty and trustworthiness is also important. Beyond that, there are various academic credentials and regulatory board qualifications. Here are the steps you will need to follow to become a stock broker.

What the Job Entails

Stockbroker Job Description:

  • Buy and sell financial products like stocks, bond and commodities
  • Clients can be both organisations or individuals that you manage the financial products for
  • Can be advisory, discretionary or functionary
  • Days can be long, sometimes exceeding 12 hours, including lunch meetings and starts hours before markets even open
  • The job can be stressful as it deals with large amounts of money, high levels of responsibility and time sensitive decisions that need to be well calculated but also quick

A stockbroker purchases and sells financial products with the intent to maximise their client's profit on the transaction. Brokers clients can be either individuals or organisations that seek the maximum return on their investments. Your role can be advisory, giving your clients recommendations as to which financial products would be the most profitable or safe. Discretionary, allowing you to manage a client's investments autonomously. Or functionary that would see you buying and selling financial products. You may choose to emphasise your work experience in one of the three specialities.

No matter what path you choose, working as a stockbroker will involve: looking at and managing clients’ investment portfolios, developing an investment plan with the client, market research, contacting clients and telling them about their portfolios performance and trying to reach out to potential new clients. As you can see, a stockbroker must wear many different hats, so if you are the type of person that has difficulty dealing with multiple mental pivots throughout the day, it might not be the best career path for you.

Stockbroker Educational Requirements

Recommended Degrees:

  • Economics
  • Finance
  • Business Degree
  • Mathematics

Although having a mathematics, finance, economics or a business degree is an advantage, due to their integrated knowledge of economics and markets, anyone with a 2:1 degree or higher can enter a stock brokerage training programme. In fact a degree is not required at all, as long as you have the necessary traits and skills.

Many stockbrokers get paid a meagre base salary plus a certain percentage of commission when they sell, buy or bring in new clients. Senior stockbrokers can make more than £100,000 a year. But, as always there is a caveat; a stockbroker’s job is indivisibly tied to the market and during periods of market volatility, many brokers end up leaving the profession.

This was actually highlighted in the Wolf Of Wall Street; Jordan Belfort was let go from his prestigious Wall Street job when the World’s financial markets collapsed on October 19th, 1987. If you don't have the perseverance, gall and stamina to sustain momentum, while seeking out clients, managing their portfolios, informing them about the performance of their stock and watching the market, you won’t be able to make a liveable salary, and you'll have to quit.

Requirements

How To Enter the Industry:

  • Enrol in an internship or stock brokerage program that firms offer
  • A lateral movement from another position within the financial industry

Personality Traits Necessary:

  • Ability to work under immense pressure
  • Quick problem-solving
  • A propensity for math and data
  • Highly developed communication and interpersonal skills
  • Moral integrity and trustworthiness, as the job often involves moving large sums of money

Of course, each employer might have different requirements for their candidates. If you are already in the financial field, you might be able to transition into the field with minimal training or be chosen by employers for your experience.

But, because the financial market is a government regulated industry you will have to apply for qualifications given by the Financial Conduct Authority. The Authority offers an extensive list of qualifications you will need depending on the field you seek to specialise in and the requirements your employer might have:

Gains – Benefits

Short-term benefits

  • High monetary gains even for early career professionals
  • Ability to move within the industry and firms
  • Developing a client portfolio (depending on your specialisation) that you carry between firms (also dependent on your employer’s policy regarding the matter)

Long-term benefits

  • Increased financial security
  • High ceiling for career advancement and longevity
  • Possibility of being self-employed or working in advisory position negating the pressure of committing high-risk exchanges and transactions

Of course, if you have the talent and ability, being a stockbroker can be an exceptionally long career, with huge financial gains. Most financial organisations promote from within which allows great potential for career advancement. Starting salaries for stockbrokers are generally around £20,000 to £30,000 per annum, but there is potential to make much more for capable individuals.

Although initially, it will be a struggle involving long hours, weekend work and dealing with difficult clients, after 5 to 10 year of experience you will be able to regulate your own workflow and select the customers who you want to work with.

Also when you first start, the money that you make on average could be as low as 1%. Meaning you could have £10,000,000 in assets and on a 30% commission you would still only make £30,000-£40,000. But, as your client portfolio increases and matures the amount of revenue that you will be able to generate will increase exponentially. For example, if you make even 5% on £10,000,000 at 30% commission, you are looking at making £150,000 per year.

The typical day for a new stockbroker would involve showing up two hours before the market opens (6 a.m.) to do the necessary research, once the markets opens the broker will contact his clients to recommend purchases or sales. After an extremely short lunch, that may or may not involve meeting with potential customers, the later part of the day is generally dedicated to meeting with clients, finding new ones and doing paperwork. Finally most new brokers spend their eleventh and twelfth hours, cold calling potential clients or engaging in other activities to find new clients. Many even choose to work on Saturday. If you’d like to experience what it can be like to trade, try out one of the many virtual traders available online.

Wealth Management, Asset Management and Private Banking

Types of advisory positions:

  • Personal Banking – Advising median income individuals
  • Privilege Banking – Advising mid-tier clients
  • Private Banking – Advising High Net Worth Individuals (HNW) or Ultra High Net Worth Individuals on their investing

This segment of the financial industry is also known as private banking, or asset management is important to wealthy individuals. Usually breaking into this segment requires an extensive network of extremely wealthy individuals that trust your judgment and financial prowess. As an asset management or wealth management officer you will not only being in charge of managing money you will also being planning their investments’ for growth in the future.

The profession can be gruelling and volatile if you intend to enter it directly. You will usually have to start as a Personal Banker, a position in which you will advise individuals on how to start investing, although this isn’t a direct path into Wealth Management, it’s a good way to become familiarised with advising investors. If you are excellent at your job, you might actually manage to develop a small client portfolio. Eventually if you manage to move up through personal banking though, you will be able to work in Privilege Banking.

This is the next tier of banking and it usually deals with lower value clients than private banking does, but has very similar responsibilities and tasks. Many advisors in privileged banking actually remain in the sector because transitioning into private banking might result in a loss of clients and ultimately income. The great thing about reaching the senior levels of private banking is that the lifestyle becomes much easier, but that’s probably because of all those 16 hour days you had at the beginning of your career.

 

Often, once a stockbroker gains experience working in the markets, they can transition into a career in wealth management. Of course, this requires a proven track record, because the main role of a Wealth Manager is to oversee people's entire financial activity, including retirement, physical assets, market assets and cash flow. Although they are paid handsomely to advise their clients, it is very easy to make misjudgements that cost you a client or worse all your clients due to a lack of faith and trust in you. High pay often comes with high risks.

Are you interested in becoming a stockbroker? Or are you currently a stockbroker? Let us know in the comment section below.

See Also: How to Become a Finance Officer

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