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finance a la shmoop. what does a stockbroker do? I've been working on the

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railroad. yep that's what they do. they broker stocks to customers and while

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generally speaking. they take a commission for the privilege of selling

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shares of whatever dot-com to their customers or clients. think about stock

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brokers like you'd think about home Realtors only stockbrokers are selling [lady celebrates in front of a house's sold sign]

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47 homes a day for five grand each give or take a lot. in the 1970s Commission's

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paid on stock and bond trades were massive. back then there were essentially

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no connected consumer computers so processing an order was relatively

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expensive and there wasn't a whole lot of competition and it took a lot of

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infrastructure to make a trade. and there were relatively few players in the

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entire industry back then like only three or four big competitors who all

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decided to charge about the same very high commission rates .well the small

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number of competitors made for a much less efficient market which meant that

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the consumer paid a whole lot more per transaction and more meant Commission's

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of 3 4 even 5% like buying a hundred shares of a $20 a share stock for 2

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grand carried a commission of something like a hundred bucks. a broker making 50 [equation]

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of these trades a day did extremely well but oh how times have changed. today a

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typical trade might carry a commission of 0.1 percent that same 2 grand trade

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today well would pay a commission of something closer to 2 bucks.

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yep you heard that right 98 percent less. so the bottom line is that there are way

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fewer stockbrokers in existence today and the ones who have survived have to

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sell a whole lot more shares or do more volume business for their customers or

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if they end up looking like this guy. so what's the daily routine ? well most

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brokers specialize in a given area of client institutional brokers

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pretentiously called sales traders. well they sell stocks to large mutual funds

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hedge funds and other major volume players the order blocks a million units

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at a time and they can trade billions and billions of dollars of stocks

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through one hot broker. well the demands on that brokers day are

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severe and high pressured. the institutional sales trader is expected [woman frowns behind a desk]

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to be up and in the office by 5:00 a.m. New York time.

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the reports from Europe and Asia leaving myriad voicemails for her customers so

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that nervous Nelly by side investors will be encouraged to place their trades

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early and often with that broker. at the other end of the spectrum are brokers

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for retail customers who sell just a few hundred or thousand shares at a time to

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a small group of people who lovingly rely on the broker for actual advice and

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are dramatically less sensitive to Commission prices should they be a few

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cents a share higher or lower. that broker is a trusted party who's relied

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upon to give advice so that Ethel and Ernie Brillstein can retire in the [man frowns, as lady is excited]

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lakeside home of their dreams. so what's the money like well on the institutional

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side it's extremely volatile. in a good year a good sales trader managing a desk

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of a dozen other sales traders can and does make millions and millions of

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dollars a year. and this is great because the average tenure of that sales broker

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is short .they die either in a bear market or in the form of a coronary

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deliver that courtesy of the tightly pressure-packed difficult nature of you

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know kind of fighting that war. well life of a retail broker is kinder

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gentler and poorer. a good retail broker lasts much longer time usually and ends

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up being on the get rich slow plan. such that year after year they're able to

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invest some meaningful amount of money in the stock market on their own

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watching their wealth grow at turtle pace but with thick hard shells of [investment returns sheet listed]

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covering their behind. the qualifications being a stock broker well ?just be good

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with people more than anything else. the deep financial knowledge that used to be

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necessary for the job has all but evaporated and the job of the sales

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trader retail broker is that of regurgitating dialogue written by sell

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side analysts and then synthesize by dozens of lawyers before being allowed

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out of the bullpen. progress or ladder climbing happens by winning new clients

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obtaining new business and increasing the dollar volumes traded through the

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front desk. so yeah stock brokers broker stocks .okay that's the to long didn't

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listen version. [man frowns]

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