Stockbroker - Overview, Responsibilities, Types, Qualifications (2024)

What Is a Stockbroker?

A stockbroker is a licensed financial market representative who buys and sells securities on behalf offinancial institutions, individual investors, and businesses.

Stockbroker - Overview, Responsibilities, Types, Qualifications (1)

A registered representative or broker is another term for a stockbroker.Stock trading, as well as the buying and sale of equities on national stock exchanges, is often done through a broker.

Both institutional and retail investors use these middlemen to complete trades. A broker's main responsibility is to collect and execute buy and sell orders.

To invest in securities, many market participants rely on brokers' knowledge and skills in market dynamics. These middlemen might operate independently or as part of a brokerage.

Broker-dealers and brokerage businesses are also referred to as brokers.

Discount brokers attract active day traders and investors because they provide additional research tools and trading possibilities with lower commissions.

A broker must pass theGeneral Securities Representative Examand have a thorough grasp of the financial industry and laws.

Types of Stockbrokers

Traders should concentrate on their trading techniques and select a broker who can assist them with their trading requirements. Short-selling stocks, for example, require finding brokers with a large list of equities to short.

The many categories of stockbrokers are as follows:

1. Broker with a full range of services

A full-service broker provides clients with a wide range of financial services. Clients are usually assigned to specifically licensed brokers. Research departments of brokerage companies provide analyst recommendations and early access to initial public offerings (IPOs).

The services provided by full-service brokers are as follows:

  • Financial Planning
  • Business and Personal Loans
  • Banking Services
  • Asset Management

For trading options, clients may either contact their personal broker or use mobile and internet platforms.

Stockbrokers who provide trading features and internet access, on the other hand, demand greater commissions. Furthermore, because full-service brokers' online platforms are often designed for long-term clients, they offer fewer indications and tools for day traders.

2. Stockbroker at a Discount

Financial goods, mutual fund access, banking products, and other services are all available through discount stockbrokers. A cheap stockbroker provides many of the same goods and services as a full-service stockbroker but at a lower cost.

As a result, more aggressive swing and day traders may find inexpensive brokers tempting. Furthermore, because the platforms are designed for active day traders and investors, they provide more research tools and trading alternatives than full-service platforms.

3. Stockbroker Online

An online stockbroker, often known as a direct access stockbroker, provides services to active day traders at the lowest possible commission — generally on a per-stock basis.

Direct access platforms with routing and charting capabilities, as well as access to numerous exchanges, market makers, and electronic communication networks (ECNs), are available through online brokers.

Online brokers also provide the benefits of accessibility and speed, allowing for point-and-click order execution.Complex options and stock orders can also be placed on the platforms.

Access to heavy-duty platforms is normally accompanied by a monthly cost that includes both software and exchange fees.However, the software fees may be reduced or waived based on the client's actual monthly share volume.

Qualifications of a Stockbroker

But becoming a stockbroker is not merely about having an instinct for the market or a passion for numbers. It involves a combination of formal education, industry-specific certifications, hands-on experience, and interpersonal skills that can meet the diverse demands of the field.

The qualifications of a stockbroker are:

1. Education

Brokers normally need a bachelor's degree in finance or business administration. Working in the industry requires a thorough grasp of financial rules and regulations, accounting procedures, economics and currency concepts, financial planning, and financial forecasting.

Global qualifications are also growing more valuable as indicators of legitimacy and financial savvy.

TheCertified Financial Planner(CFP) andChartered Financial Analyst(CFA) credentials are two examples.

In addition to market knowledge and investment abilities, the most successful brokers have great interpersonal skills and the ability to establish strong sales connections.

2. Experience

They can begin working for a brokerage business in any capacity, even as a college intern, to gather experience. To work as a broker, however, one must have a thorough awareness of accounting standards and financial market rules.

3. Exams

To work in the US, they must pass theFinancial Industry Regulatory Authority's General Securities Representative Exam(FINRA). A FINRA member company or aSelf-Regulatory Organization(SRO) must fund an applicant.

What is the Role of a Stockbroker?

They are a financial practitioner who places orders on behalf of customers in the market. A broker is sometimes known as an investment advisor or a registered representative (RR).

The majority of brokers work for a brokerage business and deal with a variety of individual and institutional clients. Brokers are frequently compensated on a commission basis, however, this varies by job.

"Broker” is a general term used to describe brokerage businesses and broker-dealer corporations. Both full-service and bargain brokers fall under this category, as they both execute transactions (but the latter does not provide personalized investment advice).

Most internet brokers, at least at their most basic levels of service, are discount brokers, meaning trades are handled for free or for a tiny set-price charge.

Access to an exchange, such as the New York Stock Exchange (NYSE) or the NASDAQ, is required to buy or sell equities listed on them.

You must be a member of the exchange or a member of a business to trade on these exchanges. The Financial Industry Regulatory Authority (FINRA) licenses member businesses and many of the individuals who work for them as brokers or broker-dealers.

While an individual investor can buy stocks directly from the corporation that issued them, working through a broker is far more convenient.

Until recently, gaining access to the financial markets was prohibitively expensive. It was only cost-effective for high-net-worth individuals or large institutional investors, such as pension fund managers.

These entities employed full-service brokers and were willing to pay hundreds of dollars for a deal to be executed.

Discount brokers are now able to provide online services with inexpensive, rapid, and automated access to the markets, thanks to the emergence of the internet and associated technological improvements.

Micro-investors have lately been catered to by applications likeRobinhoodandSoFi, which even allow fractional share purchases. The majority of accounts in today's markets are handled by their owners and kept by bargain brokers.

These brokers act as a link between markets (such as exchanges) and the general public. Customers place orders with brokers, and brokers endeavor to fulfill them as cheaply as possible. They are compensated with a charge known as a commission.

Since online brokerage systems allow consumers to submit their orders through the web or mobile app, many brokers have converted to financial counselors or planners.

Stockbrokers in the 21st Century

Discount broker businesses use brokers as over-the-phone representatives (known as voice brokers) who answer brief queries or as branch officers who operate in a physical location. They may also consult with clients who have subscribed to the online broker's premium tiers.

Investment banks and specialist brokerage firms employ a lower number of brokers.

Large and customized orders for institutional clients andhigh-net-worth individuals (HNWI)are handled by these firms.

Another recent advancement in broker services is the emergence of robo-advisors, which provide algorithmic investment management via a web or mobile app interface. Because there is little one-on-one connection, fees are kept low.

Micro-investors can use applications like Robinhood and SoFi, which allow them to buy fractional shares.

A) Broker Licensing Requirements

Registered brokers in the United States are required to possess the FINRA Series 7 and Series 63 or 66 license, as well as a sponsor in the form of a registered investment business. In the United States, floor brokers must also be members of the stock exchange in which they operate.

In Canada, aspiring brokers must work for a brokerage business and complete theCanadian Securities Course(CSC), theConduct and Practices Handbook(CPH), and the 90-dayInvestment Advisor Training Program (IATP).

Applicants in Hong Kong must be employed by a licensed brokerage business and pass threeHong Kong Securities Institute tests (HKSI). To get a license, those who pass the test must be authorized by the financial regulating agency.

TheInstitute of Banking and Finance in Singaporeadministers four tests to become a trade representative: Modules 1A, 5, 6, and 6A. TheSingapore Exchange (SGX)and theMonetary Authority of Singapore (MAS)are responsible for licensing.

Stockbroking in the United Kingdom is strictly regulated, and brokers must getFinancial Conduct Authority certification (FCA). Qualifications vary according to the broker's and employer's unique responsibilities.

As you can see, each nation’s requirements vary drastically.

B) Difference between a full-service and a cheap broker

A cheap broker typically just purchases and sells on behalf of customers, while a full-service broker offers a wider range of financial services such as research, guidance, portfolio management, and so on.

Discount brokers have separated themselves by providing research and other services in addition to pure execution, while internet brokerages have driven commissions close to zero.

Researched and authored byAkhilesh Jagtap | LinkedIn

Reviewed and edited by James Fazeli-Sinaki |LinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources:

  • Accredited Investor
  • Capital Markets
  • Derivatives
  • Investing: A Beginner's Guide
  • Long-Term Investments

I am a seasoned financial expert with a comprehensive understanding of the stock market, brokerage industry, and related concepts. I have firsthand experience navigating financial markets, advising clients, and staying abreast of industry trends. My expertise is grounded in a combination of formal education, industry certifications, and practical experience, enabling me to provide insightful information on the intricacies of stockbroking.

Now, let's delve into the key concepts covered in the article:

1. Stockbroker Definition:

A stockbroker is a licensed financial market representative responsible for buying and selling securities on behalf of financial institutions, individual investors, and businesses. They execute buy and sell orders, playing a crucial role in facilitating trades for both institutional and retail investors.

2. Types of Stockbrokers:

a. Broker with a Full Range of Services:

  • Provides a wide range of financial services.
  • Clients are assigned to specifically licensed brokers.
  • Offers financial planning, business and personal loans, banking services, and asset management.

    b. Discount Stockbroker:

  • Attracts active day traders and investors with lower commissions.
  • Provides additional research tools and trading possibilities.

    c. Online Stockbroker (Direct Access Stockbroker):

  • Offers services to active day traders at the lowest possible commission.
  • Provides direct access platforms with routing and charting capabilities.

3. Qualifications of a Stockbroker:

  • Education:

    • Typically requires a bachelor's degree in finance or business administration.
    • Valuable certifications include Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA).
  • Experience:

    • Requires hands-on experience, often starting with an internship in a brokerage business.
  • Exams:

    • Must pass the Financial Industry Regulatory Authority's General Securities Representative Exam (FINRA).

4. Role of a Stockbroker:

  • Acts as a financial practitioner who places orders on behalf of clients in the market.
  • Works for brokerage businesses, dealing with individual and institutional clients.
  • Compensated on a commission basis for executing trades.

5. Broker Licensing Requirements:

  • United States:

    • Requires FINRA Series 7 and Series 63 or 66 license.
    • Must have a sponsor in the form of a registered investment business.
  • Canada, Hong Kong, Singapore, United Kingdom:

    • Each country has its own licensing requirements, including specific courses and exams.

6. Difference between Full-Service and Cheap Brokers:

  • Full-Service Broker:

    • Offers a wider range of financial services beyond buying and selling.
    • Provides research, guidance, portfolio management, etc.
  • Cheap (Discount) Broker:

    • Primarily executes buy and sell orders.
    • Differentiates by offering research and additional services.

This comprehensive overview highlights the diverse landscape of stockbrokers, their qualifications, and the evolving nature of the brokerage industry, including the rise of online and discount brokers.

Stockbroker - Overview, Responsibilities, Types, Qualifications (2024)


Stockbroker - Overview, Responsibilities, Types, Qualifications? ›

Stock brokers are the intermediaries that conduct transactions between investors and exchanges. They are required to be licensed by the Financial Industry Regulatory Authority and usually have a college degree in finance or business administration.

What are the responsibilities of a stockbroker? ›

Stockbrokers are financial professionals who buy, sell and trade financial securities for their clients. Some stockbrokers may also act as financial consultants, helping people with all aspects of finances, from choosing the right investments to personal budgeting.

What is the qualification for stock broker? ›

How to become a stock broker? You must be an Indian citizen over the age of 21. In order to become a stock broker, you must have finished at least Higher Secondary College or 10 + 2. He is also required to clear the Financial Industry Regulatory Authority's General Securities Representative Exam (FINRA).

What credentials do you need to be a stock broker? ›

To become a stockbroker, obtain a bachelor's degree in business, economics, finance, accounting or other related areas, complete an internship, gain sponsorship from a Financial Industry Regulatory Authority (FINRA) firm and pass the licensing General Securities Representative Exam.

What is the job specification for a stock broker? ›

Stock Broker job profile

Stock Brokers must have excellent analytical and communication skills, as well as a deep understanding of financial markets and investment strategies. They must also be able to work under pressure and make quick decisions in a fast-paced environment.

Do you need a degree to be stockbroker? ›

Do you need a degree to be a stockbroker? Most firms require applicants to have a bachelor's degree. There isn't a specific major requirement, but a degree in business is especially helpful. Earning a master's degree can be helpful for advancement, but it's not necessary.

Is it illegal to be a stockbroker? ›

Stockbrokers have legal and ethical obligations to their clients and investors. Stockbrokers have to comply with federal and state securities laws for investment advisers. Some brokerages and investment companies may also have a code of ethics for their broker-dealers.

What GPA do you need to be a stockbroker? ›

Graduate Degrees That Can Lead to a Career as a Stock Broker

All MBA programs require a minimum of a bachelor's degree and generally require approximately a 3.0 GPA or higher.

Do stockbrokers make a lot of money? ›

Stockbrokers get paid more than most workers. Estimates of the median combined salaries and commissions received by people who sell stocks and other securities to investors range from $62,910 to $149,664 a year.

Do stockbrokers still exist? ›

There are dozens of stock brokerage houses in the United States. But three major firms stand out because of their name, offerings, total amount of client assets, and the number of clients they serve.

Which degree is best for stock trading? ›

Common degrees sought by traders include business administration and finance, investment management, economics, statistics, computer science, data analytics and applied mathematics. Skills traders benefit from include communication, strategic planning, technical, critical thinking and adaptability skills.

Can I be my own stockbroker? ›

An individual or firm can obtain a broker-dealer license from FINRA. The process can take up to six months. All necessary documentation must be collected and submitted as soon as possible, to minimize the amount of time lost in this process.

How much money do stockbrokers make? ›

How Much Do Stock Broker Jobs Pay per Month?
Annual SalaryHourly Wage
Top Earners$131,000$63
75th Percentile$54,000$26
25th Percentile$54,000$26

How do stockbrokers make money? ›

How Does a Brokerage Firm Make Money? Generally, brokerages make money by charging various fees and commissions on transactions they facilitate and services they provide. The online broker who offers free stock trades receives fees for other services, plus fees from the exchanges.

Is a stock broker a stressful job? ›

Stockbrokers work in a fast-paced environment that can be stressful. The stock market can drastically change from when it opens until it closes and stockbrokers need to be comfortable in a volatile market.

Do stock brokers have to be good at math? ›

Many people believe that you have to be some sort of mathematics genius to succeed as a trader. The truth is that while some maths skills are important, an advanced level of mathematical knowledge is not a requirement for success.

Can anyone become a stock trader? ›

With so many routes, anybody can enter the market, but your ultimate success depends on you. Depending on the route that you choose, trading can become a full-time career opportunity, a part-time opportunity, or just a way to generate supplemental income.

How does a stock broker make money? ›

How Does a Brokerage Firm Make Money? Generally, brokerages make money by charging various fees and commissions on transactions they facilitate and services they provide. The online broker who offers free stock trades receives fees for other services, plus fees from the exchanges.

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