Is There a Downside to Being a Stockbroker?

“Money can’t buy you happiness but it does bring you a more pleasant form of misery.” Spike Milligan

We talked about the perks in another post; money, food, fame, etc. But all this good stuff isn’t free and does come with a cost. Yes, stockbroking, like any other profession, has its own peculiar risks and negatives that you may not know about and which are worth examining.

It Isn’t Easy

If I make it sound like “Easy Street,” that is an impression I want to correct. As a stockbroker, you deal with lots of technical information and well-heeled, knowledgeable clients all day long. You can’t be sloppy and make mistakes.

When a research report or client talks about “EBITDA,” or “PE Ratio,” of “ROIC,” you need to know exactly what it means. You need to understand the story of the day, whether it is a macro one or a corporate one. You need to have “a view” that is logical and the reasons to make such a case. In short, you need to be an expert.

Nobody is born an expert in anything and finance is no exception. I started out in the business with zero experience and zero knowledge. (You can read my story here). I got lucky and was in the right place at the right time. The business is more competitive now and you can’t rely on “being lucky” to get a job! You must study basic finance, basic accounting, regulations, how to do sales, etc.

You must learn to get along with all kinds of different people, even those you do not like, and you must always, always be professional. You also have to pass your broker’s exam, the “Series 7” in the US, which is very extensive and takes weeks of study. If you don’t test well, can’t work under pressure and can’t remember things, this business is not for you.

Long Hours

I sometimes think to myself wistfully, “Wow, there are some people out there who only work from 9 to 5. How great is that?” I get up early and start going through all the news at 5:00 AM every day. I am at the office at 7:00 AM. Our morning meeting begins at 7:30 AM. I may be out with clients until late at night as well.

Even if I get to go home “early,” around 6:00 PM, that is a 13 hour day. I also have to work at the weekends – I don’t usually go to the office but have to keep up on the news and developments.

I have to read the Economist Magazine, the WSJ and/or the FT every weekend as well. For me, and many others, being a stockbroker is at least a 60 hour a week job. Sometimes it is more than that.

Pressure and Stress

This should almost be a separate post: you are confined to your desk and dealing with an angry client who is screaming at you because the company you recommended to him to buy last week just went bankrupt! The other line is ringing with other upset clients. You are late for a meeting and the markets are tanking. It can be stressful. (OK, I did write another post on this, here).

First thing in the morning, every morning, you have to hit the phones and call clients. You need to engage them on the phone and get them interested in an idea. This means you must HAVE an idea that is interesting.

And you must “broke it” to the client well. Then you have to call the next client. You must be comfortable talking on the phone all day and to people that you may not even know at all. Thick skin is what you develop – if the ulcer doesn’t get you first.

The Bonus System

Most brokers work under the bonus system: you get a minimal salary and your main compensation comes at the end of the year in the form of a discretionary bonus. The implications of a discretionary bonus are huge because the bonus is where you make your money.

A good bonus can be several times your base salary. Or, you may get a “doughnut,” a big fat ZERO which means you didn’t make squat for those 12 long months you put in on the desk. Every day of the year you will think, “I wonder what my bonus will be?” Over and over that question circulates in your head.

You won’t know until at the end of the year your boss pulls you into a room and quietly “gives you your number.” This stresses everybody out. You walk on eggshells all year long because it is up to your boss just how much your bonus will be or won’t be. You may think you had a great year and he doesn’t. Doughnut time, amigo.

Time Away from Family

If you have children you will be torn between putting in the extra mile at work and going home and seeing your kids now and then. Most people with children in the business see them only on the weekend.

That blows, I know, but it is something to think about. This also puts pressure on your spouse and he or she gets used to not having you around. Then they start to like it that way! This business destroys a lot of marriages and these things need to be weighed carefully by anyone thinking of working in it.

Being aware of these issues before you jump in to this business will help you prepare for them. The negatives I outlined above are ones most of us learn to live with. Knowing what they are early and preparing yourself accordingly will help make them less crushing.

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