Simply Put: What Is A Stockbroker?

Stockbrokers trade in securities and commodities, often working directly with individual clients. A stockbroker assesses a client’s financial ability and then offers him realistic investment opportunities. Stockbrokers trade in stock in one of two ways: trading at the floor of the exchange market or electronically. A stockbroker constantly monitors the financial market to gauge the performance of different securities uses his knowledge to trade for a profit. Corporate events, such as mergers, public offerings, yearly financial statements and acquisitions, are likely to influence a stockbroker’s decisions. A stockbroker trades primarily in stock security and commodities, and earn their money through sales commissions. 

The educational requirement for a stockbroker is a bachelor’s degree in economics, business or a related field. Having a Master of Business Administration is also valuable. The Financial Industry Regulatory Authority issues licenses for practicing stockbrokers. 

So what does a stockbroker take on? 

They seek the best deal

A stock broker represents the client, seeking the best deal to buy or sell stocks. Most brokers deal in all types of securities and many also handle commodity futures. An individual broker may also advise a client on when to buy or sell a stock or what to watch for in market dealings, but is not a licensed investment adviser. 

They handle the trade

A broker takes an order from a client to buy or sell a stock, passes it along through his brokerage firm’s network to a floor trader – in a market like the New York Stock Exchange – or a dealer in that stock on the Nasdaq electronic market. Once the transaction is completed, the broker relays the information to the client and arranges to transfer any stock certificates or other paperwork.

They’re paid on commission 

Individual brokers are paid on commissions, usually as a percentage of the value of the trade. Commissions and fees vary. Some brokerage firms call themselves “discount brokers,” offering trades at a single price. Brokers generally are governed by a “suitability role,” meaning they should recommend only investments that meet a client’s financial goals and needs.

They are tested, and must register through a brokerage firm 

Both brokerage firms and individual brokers are regulated by the Securities and Exchange Commission and specific markets, like the NYSE. An individual broker must pass a test administered by the Financial Industry Regulatory Authority, or FINRA. Once a candidate passes that test, he must complete registration through a brokerage firm, which in some cases requires registering with a securities commission in each state in which he does business.

They have requirements

Brokerage firm requirements for individual brokers vary, but most require some on-the-job training before an applicant takes a FINRA test. Generally a candidate must have worked for a brokerage firm for at least four months before taking the test. Some brokerages require up to two years of experience to become a registered broker.

What they’re paid 

Individual brokers work in brokerage offices all across the country and pay varies with the company and locale, but the U.S. Bureau of Labor Statistics says the median pay in 2010 was $70,190. That covered brokers dealing in securities, financial services and commodities and included commissions and bonuses. The BLS projects that employment opportunities will grow by about 20 percent between 2010 and 2020.




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