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How to Get a Stock Broker License
Stock brokers help customers secure their financial futures by buying and selling financial securities. Their job requires education, licensing and expert knowledge of the stock market and of the companies whose stocks they trade. A stock broker career requires keen analytical skills and nerves of steel to ride the ups and downs of the market. But those who succeed often enjoy a comfortable stock broker salary.
What Does a Stock Broker do?
Stock brokers buy and sell securities. The term “securities” refers to financial instruments that represent ownership. Securities include stocks and bonds, along with financial investments such as certificates of interest, which share profits on commodities such as gas and oil.
Stock brokers deal primarily with stocks, which represent a share of a company. For example, you might turn to a stock broker to help you buy a few shares of Microsoft stock. Each share of stock you buy represents ownership in a tiny portion of the company.
Stock prices fluctuate, sometimes daily, often depending on market conditions or the state of the economy. Stock prices can rise and fall as a reaction to an event, positive or negative. For example, if the price of gasoline drops, ExxonMobil’s stock prices could fall. Likewise, if Apple announces a promising new product, its stock prices could increase.
Stock brokers buy and sell stocks on behalf of their customers, who can include individuals or institutions such as private universities or nonprofit organizations. Some stock brokers work independently, but many work for large financial firms such as Fidelity Investments, Charles Schwab Corporation or TD Ameritrade.
Stock brokers work directly with their customers. Some customers need help investing their money for retirement, while others seek to trade stocks for short-term gains. Some stock brokers act as general financial advisors, advising clients on a range of financial matters, from real estate investments to life insurance policies.
In some cases, customers direct their stock brokers to buy and sell certain stocks. Typically, however, stock brokers stay abreast of a customer’s portfolio of investments and advise them about when to buy and sell their holdings. They research publicly traded companies, their products and finances, to provide the best advice for their customers. Stock brokers must stay abreast of market trends and know which stocks offer good long-term and short-term investments.
While stock brokers constantly stay in contact with their customers, they also spend countless hours expanding their customer base. They gain some customers through word of mouth and others by marketing campaigns through direct mailings or cold calls.
Stock brokers trade stocks through computer networks that connect with the major stock exchanges, including the New York Stock Exchange and NASDAQ. Some stock traders buy and sell stocks on international exchanges such as Euronext, London Stock Exchange and the Hong Kong Stock Exchange.
Floor brokers work on the floor of major stock exchanges, where they negotiate and make sales, face to face, with other brokers. Unlike their stock broker colleagues, floor brokers typically do not deal directly with customers.
Stock traders also buy and sell securities, but at the behest of portfolio managers. In many cases, traders and portfolio managers work within the same financial firm.
Stock Broker Education and Training
Most employers seek stock brokers who have at least a bachelor’s degree in business, finance, economics, banking or mathematics. To move up the corporate ladder, some stock brokers obtain a Master of Business Administration degree.
Financial firms typically provide training for new stock brokers. Training often involves learning sales strategies and an introduction to the company’s products and services.
Stock Broker Requirements
In addition to education and experience, stock brokers need certain personal attributes to succeed. They must have good interpersonal skills to work with customers and the initiative to develop and expand their customer base.
Stock brokers must pay close attention to details and have good analytical skills to decipher rapidly changing market factors that can impact their customers’ portfolios. They must have good math skills when calculating investment formulas and quick decision-making abilities when determining when to buy or sell stocks.
Obtaining a Stock Broker License
You must have a license to trade stocks on behalf of other people. To obtain a stock broker’s license, you must pass a series of examinations administered by the Financial Industry Regulatory Authority (FINRA).
The tests you take may depend on the types of activities you plan to engage in and the requirements of your state’s licensing bureau. Each exam has a time limit, a fixed number of multiple-choice questions and an exam fee.
Series 57 Exam
To trade stocks, you must pass FINRA’s Series 57 exam with a score of 70 percent or higher. Also referred to as the Security Traders Representative Exam, the test covers a range of topics, including professional conduct, investment products, trading, and record keeping.
To become a registered Security Trader Representative, you must pass the Securities Industry Essentials (SIE) exam in conjunction with the Series 57 exam.
The Series 57 test consists of 50 questions, which you must complete in 105 minutes or less. When taking the SIE exam, you must complete 75 questions in 105 minutes. At the time of this writing, the SIE and Series 57 tests cost $60 each.
Series 7 Exam
To work as a stock broker, you must pass FINRA’s Series 7 test, also called the General Securities Registered Representative Exam, with a score of at least 72 percent. The Series 7 exam covers Securities and Exchange Commission (SEC) rules and regulations, along with investment products and investing.
You can take up to 225 minutes to answer the Series 7’s 125 questions. The examination costs $245. Like the Series 57, the Series 7 exam requires you to also pass the SIE test in order to receive your General Securities Representative registration.
Series 63 Exam
Many states require stock brokers to take and pass the Series 63 test, also called the Uniform Securities Agent State Law Exam, which includes questions about stock market trading and tax code. The North American Securities Administrators Association wrote the Series 63 exam, but FINRA administers it.
The Series 63 examination includes 60 questions, which you must answer in 75 minutes or less, and costs $135 to take.
Once you receive your FINRA registration, you must take continuing education courses, from time to time, to retain your stock market license. Continuing education classes help you stay current on tax laws and SEC regulations.
Stock Broker Salary
In 2017, securities, financial services and commodities agents earned a median salary of around $64,000, according to the U.S. Bureau of Labor Statistics (BLS). The median wage represents the middle of the pay scale for securities, financial services and commodities agents. Top earners took home nearly $210,000, while agents at the bottom of the pay scale made around $33,000. Agents who worked for securities and financial investment companies earned the most money.
Typically, companies pay stock brokers a base salary, plus commissions. However, new brokers often begin their careers earning a straight salary.
Stock Broker Job Outlook
In 2016, around 376,000 commodities, securities and financial services agents worked in the United States. More than 40 percent of the agents worked for commodities, securities and financial investment companies.
According to the BLS, job opportunities for commodities, securities and financial services agents should increase by around 6 percent, from now until 2026. The shift toward non-traditional pension plans accounts for much of the projected growth.
Nonetheless, automated stock trading systems, coupled with financial regulations, could limit future opportunities for stock brokers.
- U.S. Bureau of Labor Statistics: Securities, Commodities, and Financial Services Sales Agents
- Financial Industry Regulatory Authority: Series 7-General Securities Representative Exam
- Financial Industry Regulatory Authority: Securities Industry Essentials (SIE) Exam
- Financial Industry Regulatory Authority: Qualification Exams
- Financial Industry Regulatory Authority: Series 57-Securities Trader Representative Exam
- The Street: What Are Securities (in Finance)?
- Always study for the exams. These exams are difficult and you must get a 70 percent to pass the Series 7 and a 72 percent to pass the Series 63 in order to receive your license. Studying for both exams your chances of passing the first time you take them.
- Always be aware of the cost of failing. If you fail either the Series 7 or 63, yhou can register to take them again one month after your last test date. Be aware though, you will have to pay for the expensive cost of the exam every time you retake it.
Michael Evans’ career path has taken many planned and unexpected twists and turns, from TV sports producer to internet project manager to cargo ship deckhand. He has worked in numerous industries, including higher education, government, transportation, finance, manufacturing, journalism and travel. Along the way, he has developed job descriptions, interviewed job applicants and gained insight into the types of education, work experience and personal characteristics employers seek in job candidates. Michael graduated from The University of Memphis, where he studied photography and film production. He began writing professionally while working for an online finance company in San Francisco, California. His writings have appeared in print and online publications, including Fox Business, Yahoo! Finance, Motley Fool and Bankrate.