Stockbrokers broker stocks to customers and, generally speaking, take a commission for the privilege of selling shares of whatever.com to their customers or clients.
Think about stockbrokers like you’d think about home realtors, only stockbrokers are selling 47 homes a day for 5 grand each, give or take…a lot. In the 1970s, commissions paid on stock and bond trades were massive. There were essentially no connected consumer computers, so processing an order was relatively expensive. It took a lot of infrastructure.
And there were relatively few players in the industry...like, only 3-4 big competitors who all decided to charge about the same very high rates. The small number of competitors made for a much less competitive market, which meant that the consumer paid more per transaction. And “more” meant commissions of 3-5%. Buying 100 shares of a $20 a share stock for two grand carried a commission of $100 or so. A broker making 50 of these trades a day did...well.
But oh how times have changed. Today, a typical trade might carry a commission of 0.1%. That same two grand trade today would pay a commission of something closer to two bucks. Yep, you heard that right...98 dollars less. So the bottom line is that there are way fewer stockbrokers in existence today, and the ones who have survived have to sell a whole lot more shares, or do more volume business for their customers.
So what’s the daily routine? Most brokers specialize in a given area of client. Institutional brokers pretentiously called “sales traders” sell stocks to large mutual funds, hedge funds, and other major volume players, who will place orders in blocks of 1 million units at a time, and can trade billions of dollars in stocks through one hot broker. The demands on that broker’s day are severe and high-pressured. The institutional sales trader is expected to be up and in the office by 4 am New York time, gleaning the reports from Europe and Asia, leaving myriad voicemails for her customers, so that Nervous Nelly buy side investors will be encouraged to place their trades early and often with that stockbroker.
At the other end of the spectrum are brokers for retail customers, who sell just a few hundred or thousands shares at a time to a small group of people who lovingly rely on the broker for actual advice, and are dramatically less sensitive to commission prices, should they be a few cents a share higher or lower. That broker is a trusted party who is relied upon to give advice, so that Ethel and Ernie Brillstein can retire in the Lakeside home of their dreams.
So what’s the money like? Well, on the institutional side, it’s extremely volatile. In a good year, a good sales trader managing a desk of a dozen other sales traders can and does make millions. And this is great, because the average tenure of that sales broker is short. They die either in a bear market, or in the form of a coronary, delivered courtesy of the highly pressure-packed, difficult nature of fighting a war, banging a tambourine, and citing Pangloss from Candide that everything is just fine, Mr. Awesomesauce.
The life of the retail broker is kinder, gentler, and poorer. A good retail broker lasts a very long time, and ends up being on the “get rich slow” plan, such that, year after year, they are able to invest some meaningful amount of money in the stock market, watching their wealth grow at turtle pace, but with a thick hard shell covering their behinds.
The qualifications? Being good with people more than anything else. The deep financial knowledge that used to be necessary for the job has all but evaporated. And the job of the sales trader/retail broker is that of regurgitating dialogue written by sell side analysts, and then synthesized by dozens of lawyers before being allowed out of the bullpen.
Progress, or ladder climbing, happens by winning new clients, obtaining new business, and increasing the dollar volumes traded through the front desk.
So yeah, stockbrokers...broker stocks. Okay, guess that’s the tl;dr version.
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Finance: What does a stock broker do?19 Views
finance a la shmoop. what does a stockbroker do? I've been working on the
railroad. yep that's what they do. they broker stocks to customers and while
generally speaking. they take a commission for the privilege of selling
shares of whatever dot-com to their customers or clients. think about stock
brokers like you'd think about home Realtors only stockbrokers are selling [lady celebrates in front of a house's sold sign]
47 homes a day for five grand each give or take a lot. in the 1970s Commission's
paid on stock and bond trades were massive. back then there were essentially
no connected consumer computers so processing an order was relatively
expensive and there wasn't a whole lot of competition and it took a lot of
infrastructure to make a trade. and there were relatively few players in the
entire industry back then like only three or four big competitors who all
decided to charge about the same very high commission rates .well the small
number of competitors made for a much less efficient market which meant that
the consumer paid a whole lot more per transaction and more meant Commission's
of 3 4 even 5% like buying a hundred shares of a $20 a share stock for 2
grand carried a commission of something like a hundred bucks. a broker making 50 [equation]
of these trades a day did extremely well but oh how times have changed. today a
typical trade might carry a commission of 0.1 percent that same 2 grand trade
today well would pay a commission of something closer to 2 bucks.
yep you heard that right 98 percent less. so the bottom line is that there are way
fewer stockbrokers in existence today and the ones who have survived have to
sell a whole lot more shares or do more volume business for their customers or
if they end up looking like this guy. so what's the daily routine ? well most
brokers specialize in a given area of client institutional brokers
pretentiously called sales traders. well they sell stocks to large mutual funds
hedge funds and other major volume players the order blocks a million units
at a time and they can trade billions and billions of dollars of stocks
through one hot broker. well the demands on that brokers day are
severe and high pressured. the institutional sales trader is expected [woman frowns behind a desk]
to be up and in the office by 5:00 a.m. New York time.
the reports from Europe and Asia leaving myriad voicemails for her customers so
that nervous Nelly by side investors will be encouraged to place their trades
early and often with that broker. at the other end of the spectrum are brokers
for retail customers who sell just a few hundred or thousand shares at a time to
a small group of people who lovingly rely on the broker for actual advice and
are dramatically less sensitive to Commission prices should they be a few
cents a share higher or lower. that broker is a trusted party who's relied
upon to give advice so that Ethel and Ernie Brillstein can retire in the [man frowns, as lady is excited]
lakeside home of their dreams. so what's the money like well on the institutional
side it's extremely volatile. in a good year a good sales trader managing a desk
of a dozen other sales traders can and does make millions and millions of
dollars a year. and this is great because the average tenure of that sales broker
is short .they die either in a bear market or in the form of a coronary
deliver that courtesy of the tightly pressure-packed difficult nature of you
know kind of fighting that war. well life of a retail broker is kinder
gentler and poorer. a good retail broker lasts much longer time usually and ends
up being on the get rich slow plan. such that year after year they're able to
invest some meaningful amount of money in the stock market on their own
watching their wealth grow at turtle pace but with thick hard shells of [investment returns sheet listed]
covering their behind. the qualifications being a stock broker well ?just be good
with people more than anything else. the deep financial knowledge that used to be
necessary for the job has all but evaporated and the job of the sales
trader retail broker is that of regurgitating dialogue written by sell
side analysts and then synthesize by dozens of lawyers before being allowed
out of the bullpen. progress or ladder climbing happens by winning new clients
obtaining new business and increasing the dollar volumes traded through the
front desk. so yeah stock brokers broker stocks .okay that's the to long didn't
listen version. [man frowns]