With a fresh batch of college graduates entering the workforce and a recently lively stock market; questions are being asked as to how to become a broker. It seems that in some sectors, there is this rather inaccurate belief that being a stockbroker is a quick and easy way to make a living. Frankly speaking, it is not.
To begin with, we have to be clear about the HUGE difference between being a stockbroker and a stock TRADER. A broker acts on behalf of other people while a trader primarily trades for their own account. It is when people confuse the latter for the former that misconceptions can arise.
What do I mean? Let’s go straight to the meat of the matter and see how much a BROKER really makes.
Simply put, based on prevailing practices, for every ONE MILLION peso transaction that a broker executes for his client, he will get (net of taxes) Php 1,360 pesos. Still sound attractive? Keep in mind, as a broker, rightly or wrongly, you WILL be held PERSONALLY accountable for your stock picks and recommendations. Put another way, pag kumita – dapat lang di ba? Pag malugi naman, kasalanan mo.
In contrast, take a look at people in the managed fund industry (Mutual Funds and UITFs). For a One Million peso placement, there will usually be a sales-load of 1% to 2% (depending on the fund / payment plan). Of that amount, there will be a sharing between the company and agent of some sort.
Then, from the 990,000 pesos or so that actually gets invested, the fund manager will take 1.5% to 2% per year – regardless of performance.
What’s my point? As a BROKER you are expected to perform BOTH of those jobs at a HIGHER level of personal responsibility for LOWER pay. Seriously, when the market dropped, could a person who invested in managed funds called their fund manager and chewed them out? Do you even PERSONALLY know WHO your fund manager is?
Still want to be a broker?
If you do, I can say that the biggest asset you can have is WHO you know. Simply put, if you know enough rich people, then you can potentially succeed in this business. If not, then it is going to be VERY difficult to earn a living.