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How Much Does Stock Brokers Make


Whenever there is news about the stock market in the news, a new wave of speculation about the people who work behind the scenes to make these market movements happen emerges. For the most part, Wall Street stockbrokers and traders remain elusive to the general public.

In fact, they could be behind-the-scenes wizards with special powers to influence the economy. And, for the vast majority of people who have never visited the trading floor of the New York Stock Exchange (NYSE) or the heart of Manhattan’s financial district—the eight east-west blocks from Broadway to South Street in Manhattan—Wall Street might as well be Oz.

Every day, stockbrokers in the United States execute a number of transactions.

They are in charge of purchasing and selling stocks in order to increase their profits. But how do they make a living? How much do stockbrokers make? Continue reading

Who is a Stockbroker?

The term “stockbroker” has evolved since the days when people traded stocks in public places like New York City’s Wall Street. Most stock trades now take place digitally, and the person who executes the transaction is known as a “advisor” or “financial advisor.” For a commission, stockbrokers today advise clients on their portfolios and assist them in making purchases and sales.

Stockbrokers are classified into two types. The first is the independent stockbroker, who is compensated directly by the client for their services. The second type of stockbroker works for a company that trades stocks for clients. This type of broker makes money by negotiating upfront commissions and other deals for his or her employer.

What does a Stockbroker do?

As a stockbroker, you must:

  • Keep up with the most recent financial and tax legislation.
  • Keep track of stock market performance.
  • Keep up with the latest financial news and reports to better understand market movements and change drivers.
  • Conduct in-depth market research and analysis.
  • Create reports and newsletters that summarize your market research.
  • Provide investment advice and recommendations (depending on the type of stockbroking service you provide).
  • Proactively seek out clients, sell your services, and manage the relationships you build. This will be accomplished through a combination of networking and cold calling.
  • Inform your clients on a regular basis about the state of their portfolio and new investment opportunities.
  • Deliver client presentations at conferences and networking events.
  • Make certain that you understand your clients’ needs so that you can make appropriate recommendations for their investments.
  • Be truthful and provide all relevant information, including risks. You cannot exaggerate or provide misleading information as a broker.
  • It’s very likely that you’ll work on commission, and it’s critical that you remember your fiduciary duty of care to all of your clients, which means that clients have placed their utmost trust and confidence in you to manage and protect their money and investments.
  • As a stockbroker, you will manage and oversee your clients’ investments, acting as a liaison between them and the stock exchange.

Stockbroking can be:

  • Institutional – services are provided to accounts that you manage on behalf of organizations or groups. Insurance companies and pension funds are examples of this. Institutional clients are generally well-informed and self-sufficient; they can also use different stockbrokers for different markets. The stockbroking firm’s revenue increases as a result of institutional broking.
  • Retail (individual) – Services are provided to retail investors, who are typically wealthy individuals with whom stockbrokers have direct contact.

Stockbrokers work in a variety of ways, depending on how much control the client desires:

  • Discretionary – You will manage all investments and make decisions on your clients’ behalf, including stock market purchases and sales.
  • Advisory – You will advise on appropriate investments but will only act on your client’s orders.
  • Execution-only – You will only engage in investment activities on the express request of your clients and will not provide any advice.

In all cases, you will deal directly with your clients and manage their wealth portfolios. Stockbrokers are expected to manage existing clients as well as generate new business.

Types of stockbrokers

Before we answer the question of “how much do stockbrokers make”, you should know the types of stockbrokers and what they offer. The different types of stockbrokers are-

  • Full-service broker – You will provide personal service to your clients and pass on important information that those who do not have full brokerage service will not have access to. Typically, you will be paid a commission if the client invests in the stocks in which your firm specializes. You will provide personalized investment research and recommendations.
  • Discount broker – You will only carry out orders from your clients and will not provide advice, analysis, or research.
  • Online broker – You will assist your clients in conducting their own research by providing them with charts, investment news, and a list of stocks to consider. Client contact is not personal, and they are generally well-versed in the stock market.

How to Become a Stockbroker?

Obtain your credentials

To begin, you’ll need a bachelor’s degree, and a major in finance is probably a plus. A summer internship is a good place to start; eventually, you’ll need to be hired by a brokerage or other firm registered with FINRA (Financial Industry Regulator Authority), which will agree to sponsor you for the state licensing exams you’ll need to pass to become a broker.

You’ll need to obtain your Series 63, which deals with basic ethics and related issues, as well as your Series 7, which allows you to sell stocks and other securities other than futures and commodities.

Work extremely hard.

Not everyone is cut out for a career as a stockbroker. No, you don’t have to be as recklessly ambitious as Bud Fox, the junior stockbroker in “Wall Street,” who crosses all kinds of legal and ethical lines as Gekko’s protégé, a ruthless corporate raider modeled after Carl Icahn, Ivan Boesky, and J. Tomilson Hill.

To court and recruit customers and build a book of business, you must have a gift for gab, a knack for sales, and unwavering determination. This can entail a significant amount of work in the evenings and on weekends, either meeting with clients or cold calling and organizing events to recruit new ones.

According to the US Bureau of Labor Statistics, one in every three people in commodities, securities, and financial services sales work more than 40 hours per week.

The first five or ten years for new stockbrokers can be the most difficult as they build a portfolio of customers with assets to invest in. A stockbroker’s job is not a 9-to-5 job where you get the same paycheck week after week with the occasional raise.

Choose the appropriate industry.

According to the BLS, brokers who work directly for firms that specialize in the sale of securities, commodities contracts, and “other financial investments and related activities” earn a median salary of $96,550. These firms employ approximately 43% of all stockbrokers. Working as a stockbroker for a bank or other lender, where another 43% of brokers work, is slightly less lucrative, with a median salary of $47,260.

Gain work experience

You must have a solid understanding of how financial markets operate. Internships and placements offered by the major players can bring you up to speed on current market trends and jargon.

Obtaining a relevant internship during your first or second year of university is critical; without that experience, it is extremely difficult to land an interview. Internships are available at investment banks and stockbroker firms, for example. Current job openings are usually listed on the websites of individual companies.

Experience in sales and customer-facing roles

The majority of employers are located in the City (of London), and they include: investment banks, fund management firms, and specialist brokers.

Firms must follow a set of guidelines established by the Financial Conduct Authority (FCA), companies House, Financial Services Register, and the London Stock Exchange all have information on the firms. City Jobs UK is a good place to look for job openings.

It is critical to establish a network of personal contacts capable of identifying new opportunities.

What States pay Stockbrokers most?

If you want to know the answer to “how much do stockbrokers make”, you should also know the states that pays stockbrokers most. The top states are-

  • New York City pays $162,550
  • Rhode Island pays $130,040 
  • Connecticut pays $126,080
  • Massachusetts pays $116,030
  • Vermont pays 113,520

What is the Job Outlook for Stockbrokers?

In 2016, there were 375,700 brokers and other financial services salespeople working in the United States. That figure is expected to rise by 6% to 398,000 by 2026, slightly slower than the 7% growth rate projected by the BLS for all occupations. Automation is expected to have a negative impact on job growth in the sector.

Having said that, stockbrokers can still make a good living in a job that, for the very ambitious, can be a stepping stone to even greater things. TheStreet’s very own Jim Cramer is one of those who got their start on Wall Street as a stockbroker. Cramer spent three years at Goldman Sachs in the mid-1980s before leaving to launch his own hedge fund, TheStreet, in 1996.

How Do Stock Brokers Make Money?

It all comes down to commissions. A stockbroker’s commission is a percentage of the total value of a transaction. It’s worth noting that commissions differ by industry and time of day. Stock commissions vary according to the average daily price. As a result, brokers profit more from higher-priced stocks. Stockbrokers also make more money in the morning when they execute trades.

In reality, stockbrokers do not make any money; instead, they charge a commission to the people on the other end of their trades (ie, people who they trade for or people who hire them to trade their money). In most cases, this is about 1% of the total value or amount being traded.

As an example, if you have $100 to invest and decide to purchase ten shares at $10 each, your broker will charge a $1 commission fee. A broker will charge a commission of about 1% of the value or amount being traded.

There are some brokers who charge less, but this is the industry standard. Many individual investors are unaware that they are being charged a commission to trade stocks, so it is safe to assume that most stockbrokers charge their clients 1% or more.

How much do Stockbrokers make?

For stockbrokers looking to make the most money, New York, and particularly Wall Street, is the best major metro market. While specific figures for New York City are not reported to the BLS, the state with the highest median pay for brokers, at $162,550, is New York.

According to the BLS, the New York metro market, which includes parts of Connecticut and New Jersey, also has the highest concentration of brokers and other financial services sales agents, with 59,110, or 8.83 per thousand.

You’d never guess who came in second on the pay scale: Muscle Shoals, Alabama, is home to two music studios that have produced numerous hit records since the 1960s. Thirty brokers and other financial salespeople earn a median salary of $141,210 in Muscle Shoals and other small towns in the area.

The wealthy New York suburbs around Stamford, Conn., are No. 3 on the pay list, with an average salary of $141,070, and rank fairly high in terms of the number of brokers and other financial salespeople $4,180.

Other surprises include the fact that Oklahoma City’s 740 brokers and financial salespeople earn a median salary of $121,400, while Jacksonville’s 2,740-member contingent earns $118,520.

Frequently Asked Questions

What exactly do Stockbrokers do?

A stockbroker is a licensed professional who can buy and sell stocks on behalf of other investors. Stockbrokers are typically employed by a brokerage or a broker-dealer and are regulated by the Securities and Exchange Commission (SEC).

Who is a Stockbroker?

Stockbrokers are individuals who buy and sell stocks and other securities on a stock exchange or over the counter for retail and institutional clients in exchange for a fee or commission. Institutional stockbrokers work with fund managers and other financial institutions, but retail investors exist as well.

Where can I find a Stockbroker?

The majority of stockbrokers work for brokerage firms and handle transactions for a variety of individual and institutional clients.

Are Stockbrokers wealthy?

The average stockbroker does not make the millions that we often imagine. In fact, some people lose a lot of money as a result of their trading activities. The majority of businesses pay their employees a base salary plus a commission on the trades they execute.

Is working as a stockbroker a good job?

A career as a stockbroker may be a good fit for you if you enjoy sales, are a self-starter, and have an interest in the world of finance. A stockbroker can be a good career for a hardworking and ambitious individual, with a high earning potential and fulfillment from developing your own client base.

How much do stockbrokers make?

The amount you would make as a stockbroker depends largely on the amount of sales you make and the commission attached to the sale.

Conclusions

If you want to be a Stockbrokers, long days are to be expected, with a typical day lasting from 7 a.m. to 6 p.m. This is to cover the opening of the world’s financial markets. You will most likely work irregular hours in order to establish contact with clients in different time zones. Some companies will require you to travel abroad on a regular basis, and you may be away from home for a couple of nights per week.

References

atlanticride.com– How much do Stockbrokers make.

thestreet.com– How much do stockbrokers make

ziprecruiter.com– Stockbroker salary per month

investopedia.com– Secrets of wallstreet

prospects.ac.uk– Job profile of a stockbroker



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