In order to buy and sell shares of stock in companies listed on the stock exchange, you need a stock broker to help you with the transaction. But what is a stock broker and what exactly is a stock? Stocks are pieces of paper that give someone part ownership in a company, and part of the profits that company earns. A stock broker is a licensed salesperson and sometimes financial advisor who works for a stock brokerage house and carries out all financial transactions. They are also called investment dealers or account executives. The broker acts as the link between the investor and the stock exchange. When an investor wants to buy or sell a stock or security, the broker relays the order through their financial firms computers to the floor of a securities exchange, such as the New York Stock Exchange (NYSE). There, floor brokers negotiate the price with other floor brokers, make the sale, and forward the purchase price to the stock broker.
There are two basic types of financial planners: full stock brokers and discount brokers. Some actually do both types of work. Full stock brokers analyze portfolios, suggest and buy stocks and provide a whole range of other services. Stock brokers charge commissions for their service, usually from one to three per cent of the money invested. The discount broker does not provide advice or suggestions to clients. They merely carry out the transactions, such as buying or selling stocks, desired by the client. Discount brokers are more suited for people who prefer to do their own research into their investments.
An important aspect of the occupation is finding prospective clients and building a customer base. Many stock brokers contact potential clients by cold calling or they meet new clients through business and social contacts. More established stock brokers might generate new business through referrals. Some write a column for a newspaper, or appear on television or radio shows to offer their financial suggestions.
Being a stock broker can be extremely stressful and emotional. Since the nature of the business is investing other peoples money, brokers must take full responsibility should something go wrong. If you lose someones earnings, you must be willing and able to take the heat and search for alternatives to improve the situation. Most stock brokers are quite conservative in their investing and thoroughly research stocks before buying them. Stock brokers must keep up with the latest market information and trends and constantly research new stock ideas and companies. Keeping the clients in mind, stock brokers must honestly consider their needs and situations before your own, in order to properly advise them on investment opportunities. Further, brokers must then suggest new investment ideas to the client so that a client will entrust their money with the broker in the future. This strong commitment to the client and the job can sometimes conflict with ones personal life because brokers have to be dedicated and on call for their clients.
Due to the explosion of online trading, personal investors are becoming more self-sufficient and comfortable using their computers for investing, thereby eliminating the need for a stock broker. People are now forming relationships with their computers instead of with financial dealers. However, so many individuals have no knowledge or experience with stocks and therefore still rely on the expertise of the stock broker.
A stock broker needs to have superior skill in interpreting, analyzing and researching information. Good listening and communication skills make the mark of a great stock broker. A large part of the job deals with communicating with clients, in person and on the phone, and making new contacts. Therefore, brokers must respect client confidentiality and be culturally and emotionally sensitive to the clients needs. Stock brokers have the ability to understand complicated financial documents such as pension plans, financial statements and tax regulations, keep up-to-date on financial matters and consider new approaches to problem-solving. They must be confident in their financial knowledge and consulting as well as enjoy taking a methodical approach to research.
Stock brokers must be able to deal with rejection and handle an increasingly stressful working environment. They can assess a hectic situation, take a deep breath and thrive on the pressure of any situation. Finally, stock brokers love working with numbers and are experts in the stock market.
Buy and sell stocks, bonds, treasury bills, mutual funds and other securities for individual investors, pension fund managers or companies such as banks, trust companies and insurance firms
Provide investment information and advice to clients
Review financial periodicals, stock and bond reports, business publications and other material to identify potential investments for clients
Monitor clients investment portfolios and ensure that investment transactions are carried out according to industry regulations.
Discuss investment objectives with clients and make recommendations accordingly (e.g. low risk securities only, or a balance of high and moderate risk securities with long term growth potential)
Maintain strict confidentiality regarding client information
Seek out new clients by identifying and calling on potential clients
Stock brokers either work alone or with other financial planners, in fully equipped offices or out of their homes. Many stock brokers travel frequently to meetings at clients homes or businesses and to conferences. They generally tend to work long hours due to the amount of research and planning put into each clients account. This is a fiercely competitive business with constant pressure to trade securities. They may also work evenings and weekends as meetings may take place at night or on a Saturday or Sunday.
Stock brokers are employed by private financial related institutions. Some are employed by smaller financial planning businesses, few are self-employed, while others are employed on a full-time basis or contract their services to larger firms and organizations such as stock brokerage firms, trust companies, stock and commodity exchanges, banks and other lending institutions, investment companies, mutual fund companies, and private financial planning companies. Accordingly, self-employed brokers contract their services out to individual investors.
Some of the larger investment firms hire summer students, which is an excellent entry-level position to learn from. Firms also recruit students on campus across the country during the spring. New employees generally start in entry-level discount broker positions and then with more experience and a better feel for the market, they move up and become full stock brokers. Advancement in the stock brokerage field depends almost entirely on the individuals initiative, success and ability.
Successful stock brokers usually come equipped with years of experience, often in other sectors of business. Generally, they are not young and fresh out of university as people tend to entrust their money with older, more experienced investors. Also, it takes years to build up a wealth of clients therefore this career takes many years to achieve fully. Experienced stock brokers may decide to specialize in a particular aspect of investment, for example high tech stocks, or move into supervisory or senior management positions in larger companies or professional associations. More established stock brokers might even be written about in financial journals if they choose profitable stocks and make themselves well known in the financial community.
Stock brokers require a college or university degree with a concentration in finance or business-related topics. Courses in computers and information technology are also important in the stock brokerage field. Many brokers have a Master of Business Administration (MBA) which gives them more insight into the financial world.
New stock brokers often spend their first couple of years developing a client base. This takes a lot of hard work, determination in the face of rejection, and persistence. It is often best to have experience in sales before getting started as a stock broker.
Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 2014-15 Edition,
Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment Statistics, 2002,
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