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How To Become A Stock Broker

When most people think about trading stocks, they imagine flurries of stock traders packing bustling trading centers in the heart of New York City’s Wall Street.

While most of today’s trades are completed with the help of low-cost online brokerage platforms, human stock brokers do still exist.

Many institutional investors prefer the human touch that comes with hiring a stock broker to manage their investments — especially when there are millions of dollars on the line.

In the age of online trading, there is currently less of a demand for stock brokers. However, there are still many corporations and institutions who don’t want to leave their trading up to a machine.

Let’s take a closer look at what a stock broker does and how you can take steps to become one. 

Stock Broker vs Stock Trader

Before we dive into the steps to becoming a stock broker, it’s important that you understand the difference between a stock broker and a stock trader.

Stock Trader

A stock trader is someone who buys and sells stocks in hopes of making a profit between their buy and sell prices.

For example, a stock trader might buy 100 shares of stock at $5, sell them when the price reaches $7, and pocket the difference between the trades.

A stock trader might be independent, or he or she might work on behalf of an investing company or institution. The specific stocks that a trader will buy and the amount of time that he or she will hold them will vary depending on the trader’s individual trading philosophy.

There are no special degrees or licenses required to become a stock trader. Thanks to the spread of online brokerages, anyone can get started trading stocks from the comfort of their home or office.

Stock Broker

A stock broker isn’t the same thing as a stock trader. A stock broker is someone who buys and sells assets on behalf of another person, usually a stock trader. Unlike stock traders, stock brokers must go through a series of rigorous exams before they can start working and advertising themselves as a licensed broker.

Stock brokers are necessary because an individual trader cannot access the financial markets themselves. While it might seem like you’re directly buying and selling stocks when you trade online, the truth is that your online broker is buying and selling stocks with directions from you. Human stock brokers follow the same processes, buying and selling assets on behalf of their clients. Many stock brokers also offer investing advice to their clients in regards to which stocks and assets are worth investing in.

In exchange for executing trades, stock brokers typically charge clients a commission. A broker might charge a percentage commission per transaction, or they might charge a flat-rate fee per share purchased or sold. While some online brokers have ditched the traditional commission model, this is still how most human stock brokers earn their money. 

Education Level

While there is no specific college degree required to become a stock broker, most brokerage firms only hire college graduates who hold a bachelor’s degree. To begin on the path to a career as a stock broker, choose a degree that will help you better understand the financial markets. Some majors that will help you get a job at a brokerage firm may include:

  • Consumer and Family Financial Services — A degree in consumer and family financial services will help you understand complex tax and budgeting concepts. It can also help prepare you for a career offering investment suggestions and advice to individuals and corporations.
  • Business or Finance — A bachelor’s degree in business or finance will help you gain a firmer grasp on financial markets and how they operate.
  • Accounting — A degree in accounting can help you better analyze company cash flow and SEC filing data to better inform your clients on which stocks to buy and sell.

Many stock brokers also hold a master’s degree in business management (MBA) or a masters in finance.

If you’re still in high school, there are courses that you can begin taking now to set yourself up for a more successful career in college. Some courses you might want to explore may include:

  • Accounting
  • Business administration
  • Business finance
  • Marketing
  • Economics
  • Business ethics
  • Corporate psychology
  • Taxation
  • Statistics and other high-level mathematics courses

Set up a meeting with your guidance counselor to learn more about the specific business and accounting courses your school offers. Some schools even offer co-op programs with local community colleges for junior and senior students, allowing you to begin taking collegiate-level courses for credit. 

After you complete your college education, you’ll want to search for a job with a brokerage firm before you can take the required licensure exams to become a stock broker. This is because you must have a licensed broker-dealer sponsor you before you can take the exams. Exams required for stock brokers are as follows: 

  • Series 7 — The Series 7 exam (sometimes referred to as the General Securities Representative Exam, or “GSRE” for short) is an entry-level exam for those looking to become stock brokers. The exam is administered by the Financial Industry Regulatory Authority (FINRA) and is required for anyone who wants to buy or sell securities on behalf of another party. The Series 7 exam covers a variety of topics on investing, maintaining client information, making appropriate recommendations, transferring assets, and more. 
  • Series 63 or Series 66 exam — Most stock brokers are also required to take the Series 63 or Series 66 depending on their specific state laws. The Series 63 exam covers a variety of ethical practices and regulations one must follow when selling assets to clients. The exam covers topics like avoiding conflicts of interest, ethical marketing practices, and maintaining accurate record books and billing statements.  

The Series 66 exam is a combination exam that covers both requirements on ethical recommendation and marketing practices as well as information on economic factors and investment vehicles. If you take the Series 66 exam, you don’t need to take the Series 63 because the Series 66 exam includes much of the same content plus additional securities questions. Some states require brokers to take the full Series 66 exam, while others only require the Series 63. 

The Series 7 and Series 63 or 63 are the bare basic exams that you must pass in order to work as a stock broker. Additional exams are required if you want to sell municipal bonds, futures contracts, government securities and securities trading on international markets. 

Stock Trading Experience

You need a broker-dealer to sponsor you before you can take the exams required to become a stock broker. As a result, most brokers begin their careers in the sales departments of a brokerage firm. As a sales or customer service representative, you’ll receive on-the-job training on how to legally solicit clients and recommend securities. You’ll learn while working under a licensed broker until you’re ready to take the Series 7 and Series 63 or 66 exams.

What do brokerage firms look for in would-be brokers? Some of the characteristics that your employer will look for include:

  • Great communication skills — As a broker, you’ll be working directly with clients. A set of great communication skills is essential for a broker, as you’ll be directly recommending securities to your clients and explaining complex investing terms and concepts.
  • Ability to handle rejection well — Being a broker means handling rejection well and rolling with the punches. Brokerage firms look for tenacious employees who know that on-the-job rejection shouldn’t be taken personally.
  • A passion for competition — Brokerages are in constant competition with one another, and the availability of online trading has made the market for institutional clientele even more competitive. You’ll need to prove that you can handle a hyper-competitive market during your sales training if you want to find an eventual position as a stock broker.

Once you begin your on-the-job training, the broker-dealer you work under will help you decide when to take your necessary exams. Many brokerage firms also cover the costs of educational materials and exam fees during your tenure. 

Ongoing Education and Requirements

Once you pass the necessary exams, you’ll officially be able to work as a stock broker! The only thing left to do from here is keep up with your continuing education requirements.

When you reach your third year working as a stock broker, you’re required to participate in FINRA’s S101 General Program. The S101 General Program is a continuing education program that aims to refresh your memory on compliance, regulatory, ethical and sales practice standards. The S101 is administered as an online training program, and you must complete it within 120 days of your third anniversary of passing your final FINRA Series 7, 63, or 66 exam. You’ll need to retake the S101 once every three years you’re employed as a broker. Additional training programs are required for managers.

Your brokerage firm will also hold annual training each year. You’ll be required to participate in ongoing education sessions sponsored by your employer. Oftentimes, these sessions cover the firm’s unique sales practices, regulatory standards, and associated risk factors.

You must also renew your license every year you’re employed as a broker. Your license renewal may or may not be automatic depending on which state you work in. You may also need to pay an annual fee to keep your license current.

Becoming a Broker

Becoming a stock broker can be a fulfilling and rewarding career for those who thrive in competitive environments and who have a passion for investing. Becoming a broker involves a number of steps, beginning with a bachelor’s degree in a relevant financial field. After obtaining your degree, you’ll begin working under an already-licensed broker-dealer, who will sponsor you through your necessary exams. Once you’ve passed FINRA’s required Series 7 and Series 63 or 66 exams, you can start working as a broker.

If you think a career as a broker might be right for you, it can be helpful to get some hands-on experience in the market by opening an online brokerage account.