Tips for Hiring A Stockbroker

By October 5, 2019 Investing
Calculator for investments

You’re getting ready to hire a stockbroker for either yourself, or for your company. It’s an important step for your finances, so you need to make sure you make the right choice.

There are thousands of stockbrokers out there, and even more people that call themselves stockbrokers, but are anything but. Many people are beginning to buy and sell securities on their own, and consider that proper experience to get a job as a stockbroker.

We’re here to tell you that is not the case. Becoming a stockbroker is not easy, and only truly talented professionals become actual stockbrokers.

Let’s take a look at what you need to look for if you are getting ready to hire a stockbroker for yourself or your company.

Background

If you are considering a stockbroker to handle your investments, you must know their background.

Knowing about their education history is a great place to start. Does your potential stockbroker have an MBA (Masters of Business Administration) or a Bachelor’s of Arts in English? The choice between the two should be pretty simple to make.

But, education doesn’t necessarily tell all. What does their career look like? Have they worked as a stockbroker before? And – perhaps more importantly – do they have a history of success?

Understanding how to analyze portfolios and results is crucial. Asking your potential stockbroker about their successes, along with how they measured those successes, is crucial for feeling confident that they’ll handle your investments properly.

Licensure

Becoming a stockbroker requires obtaining a permit.

To obtain this permit, there are several exams to take, all administered through the Financial Industry Regulatory Authority (FINRA).

One of these is the Series 7 Exam. It’s a difficult multiple-choice exam that, along with the Securities Industry Essentials Exam, offers the proper permits to sell and buy securities on someone else’s behalf.

Some states will also require additional exams to be taken, such as the Series 53 (for municipal bonds), 63, and 66 exams. If your stockbroker doesn’t have this type of licensure and permitting, you should steer clear from them as a candidate.

Human or Computer?

There’s no industry more quickly becoming automated than finance. Given the sheer amount of transactions that take place every day, and how razor-thin some of the most lucrative opportunities are, many firms and people are relying more and more on computers to do their trading for them.

To answer this question, you have to ask yourself what your goals are. If you are a hedge fund, having a professional human in the stockbroker seat will allow you to adapt more readily to changes.

But, more and more fund managers are vying for artificial intelligence to do their trading for them. That’s because the sophistication of computers is increasing so quickly, it’s thought that soon enough they will be able to predict with better success market trends than human stockbrokers.

Whether you decide to go with a human broker or an automated service run by algorithms, it’s always best to do your research. The best choices are those deliberated upon, so put in the work you need to feel comfortable with the choice you’ve made.

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