Stockbroker  What They Do

Just the Facts


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dotWhen someone wants to buy or sell stocks, bonds, mutual funds, insurance annuities or other financial products, they may go to a stockbroker. Stockbrokers may also be called securities sales representatives, registered representatives, account executives or investment dealers.

dotStockbrokers are licensed to buy and sell stocks. Stocks are pieces of paper that give you part ownership in a company, and part of the profits that company earns (in the form of dividends). When investors sell their stocks, they can make a profit, depending at what price they were bought and at what price they were sold.

dotThere are generally two types of stockbrokers: The first is the traditional kind of stockbroker, also called the full stockbroker or investment advisor.

These stockbrokers analyze portfolios, suggest stocks, offer clients accounts from which they can buy stocks, and provide a range of other services. They charge commissions for their service, usually from one to three percent of the money invested.

When a stockbroker is beginning to work with a client, they determine how much risk they are willing to take, how much money they wish to invest, and the financial goals they wish to reach. Using that information, they build a portfolio for them -- a collection of items such as stocks, bonds and cash.

dotThe second type of stockbroker is the discount broker. This type of stockbroker does not provide advice or suggestions to clients. They simply complete the transactions, such as buying or selling stocks, desired by the client. People who prefer to do their own investment research would likely go to a discount broker.

dot"I think you have to have a feel for the market," says Brian Paragamian. He's a former stockbroker who now teaches people how to trade stocks online. "For the most part, the public loses money in the stock market, whether it be mutual funds or buying stocks as investments, because most people are counterintuitive," says Paragamian. "Everyone knows you're supposed to buy low and sell high, but it seems like everybody buys high and sells low."

dotThere are two important changes taking place in the world of the stockbroker. First, clients are becoming much more knowledgeable about investing and are choosing their own investments. This has increased the demand for discount brokers while reducing the demand for full-service stockbrokers.

The Internet is also taking a toll on traditional stockbrokers, because investors can get real-time information about stock prices online.

Investors are now able to carry out their own transactions by using online discount brokerages. This means they don't have to use a broker at all. But stockbrokers who can provide reliable advice remain in demand, especially for those with large portfolios to manage.

dotStockbrokers with proven track records and reputations for integrity will continue to find clients eager to use their services.

"First of all, you have to be honest with your clients," says Paragamian. "If you don't have honesty and integrity, you can throw [this career] right out the window."

dotStockbrokers may work for brokerage firms and banks. They are also found in other types of financial institutions.

New stockbrokers typically spend their first few years developing a client base. This takes a lot of hard work, determination in the face of rejection, and persistence. A background in sales can therefore be helpful for stockbrokers.

"I think there's really two main qualities someone needs to have going into this profession," says Alexandra Chou, a stockbroker in New York City. "One is thick skin. You need to be able to take rejection when people decline your services, and not take things personally. Second, you need to have an entrepreneurial spirit."

dotThere is a lot of pressure for stockbrokers to meet targets. These are typically measured by the total dollar amount of the assets that a broker is managing.

"Firms do put you under a fair bit of pressure to make profits, to make commissions," says Donald Dony, a financial market analyst and former stockbroker. "It is a commissions-driven business.

"Certainly, you've got to be a very, very hard worker," Dony says. "I mean, those first five years, you're going flat out. I was working seven days a week, whether I was doing analysis or I was gathering information.... Those first five years are really, really critical. You have to work so hard. And then you've got enough assets under you."

At a Glance

Buy and sell stocks for clients

  • More people than ever are buying securities
  • The Internet has changed the way people manage money
  • A degree will probably be necessary


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Securities, Commodities, and Financial Services Sales Agents