Stockbroker obsolete?

Hey,

Fresh off a BBA from a bad school not going to sugarcoat it, also a US military vet. Mid twenties. I recently spoke with a small retail operation of stockbrokers. Are stockbrokers obsolete in 2016? What type of cash can you expect to generate/How do you generate leads? Solid career choice for a recent grad?

 
Best Response

You're probably in the wrong forums because you're mostly going to hear from students with an IB-or-bust mentality.

My two cents: it all depends on what you like. If you are a people person and enjoy customer service, then this could be for you. Your compensation will largely be commission based, so if you want to be a good stockbroker and make great money, you need to develop strong relationships with people who trade a lot. It will be around in 2016 and beyond, but it's not a great profession for the long haul. I don't know this for a fact, but my hunch is that most people dealing with stockbrokers anymore are a bit on the older side. Millennials are pretty deal-focused, so they will probably research discount brokerages before signing up with the traditional, high-commish brokers. I still think, however, that there will always be those that prefer talking a trade through with a broker rather than a PC or phone.

 

Brokerage is dead, long live PWM. People need more value add than simply placing trades. Try and get into private wealth management or private banking, which is more about holistically dealing with wealth. Stocks and bonds are only one piece of the puzzle, a good private wealth manager is going to be dealing with minimizing taxes, helping to achieve goals, planning for eventualities. thebrofessor could probably give you a better sense.

 

I interned at a brokerage. Here's my two cents:

-Comp is 100% dependent on your client relationships. In my office there was one FX broker who was very open about the fact he was taking home $1mil+ each year, drove a Maserati, had a huge house etc. And he did FUCK ALL, I kid you not I spent an entire afternoon with him drinking scotch and throwing paper planes off the roof of our tower. But he was one of the company's biggest assets because he owned relationships with clients who traded in huge volumes and generated millions of dollars of brokerage. Kudos to him for probably being the most successful guy I know at balancing comp with work/life balance.

-Average brokers weren't paupers, but didn't seem to be living it up.

-Stocks seemed to be the worst division to be in. I had seen the division revenues and they were by far the lowest compared to say commodities or FX. They were however the smallest, but chicken/egg.

-Commodities/FX brokers were able to generate extra revenue streams through providing advisory services (i.e. developing strategies to manage their FX/commodity price exposures) to commercial/corporate clients. Stock brokers did not seem to have this opportunity.

-Firm was doing well and expanding. My gut feeling is that phone brokering, especially for retail clients, is in decline.

 

I think it would be difficult, but I think the above posters are missing one point. IB is a relationship driven business. While you won't gain much of the technical skills you need for IB at the junior levels, I could see at least the possibility that you end up making contacts that really boost your career as a mid or senior guy.

Best of luck. This industry isn't ever easy, but don't give up. No matter how many "nos" you get, you only need one yes.

"They are all former investment bankers that were laid off in the economic collapse that Nancy Pelosi caused. They have no marketable skills, but by God they work hard."
 

you're probably thinking of a boiler room. I'm at a BB and we don't even have a bullpen. it could be different depending on the firm/location, but I've visited all of the big firms and literally none of them are like what it sounds like you're talking about. offices are quiet, people keep to themselves, you are essentially running your own business so there's very little interaction with other brokers, thus no alpha male environment.

 

You'd get a kick out of this one bro-a guy I used to know (good girlfriend's boyfriend then husband now ex) was at a true boiler room back in the early/mid 90's and the stories he told were almost completely out of the movie Boiler Room but he told me them a couple of years before that movie came out and well before the Wolf of Wall St. Tales of not giving trainees chairs and taping phones to their hands until they opened accounts, yelling and screaming, coke all over the place, outrageous cars, etc. He said, and this is early 90's dollars, that he made $12k his first year, $400k yr 2, $1.4MM yr 3, almost $3MM year 4 and at the end of that year lost his license and was permanently barred from the industry.

I think that's the popular conception. Or the '87 Wall Street film. Unfortunately, or fortunately, it's just not that interesting.

 

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