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Chad Mason Instructor: Malcolm Campbell English 1102 February 12, 2014 Stockbrokers: Separating the Wolves from the Sheep

Money, greed, and controversy I! you"ve seen the recent bo# o!!ice hit The Wolf of Wall Street, chances are these are some o! the $ords that come to mind $hen thin%ing o! the notorious pro!ession o! being a &toc%bro%er 'he movie portrayed the speci!ic (ourney o! )ordan *el!ort, a !ormer &toc%bro%er $ho ran pump and dump schemes that cost his clients hundreds o! millions o! dollars !or his o$n bene!it 'his led many vie$ers to believe that all stoc%bro%ers ma%e their money immorally and $ith no regard !or society $hatsoever, yet, are there &toc%bro%ers $ho ma%e their living the right $ay and still obtain great success+ 'his essay see%s to decipher the positives and negatives o! hiring a bro%er, !ind an e#planation o! $hat separates the success!ul stoc%bro%ers !rom the many that !ail, and i! they can achieve this success $ithout sacri!icing their moral values What is a stockbroker? It is !irst important to note $hat e#actly it is that a stoc%bro%er does *ro%ers are people $ho handle customer"s transactions and are in control o! buying and selling securities 'hey act sort o! as a middleman, such as a retail store that o!!ers your !avorite brand o! clothing 'he main !ocus o! being a bro%er is that it is a sales (ob *ro%ers ma%e their living by receiving a commission !or the trades they process 'hey must be able to identi!y trends and relationships in the mar%et, !or e#ample, i! the price o! corn goes up, ho$ does this a!!ect the car industry+ 'he

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&ecurities and E#change Commission ,&EC-, $hich oversees and regulates all trades in the .nited &tates, states that to be a stoc%bro%er in the .nited &tates, you must pass t$o licensing e#aminations !rom the /ational 0ssociation o! &ecurities 1ealers ,/0&1-: the &eries 2 and the &eries 34 'hese e#ams prove that a bro%er is in!ormed about $hat he or she is selling and %no$s all the regulations and la$s in the securities industry ,humancapitalrc org- 'he %noc% against bro%ers is that their interests may not al$ays align $ith their clients, they ma%e a commission on the amount o! money that they can get their customer to invest, so the incentive is not necessarily to ma%e their clients the most money, but instead to get them to invest as much as possible 'his has led to much o! society portraying a negative image upon bro%ers, especially a!ter the !inancial crisis o! 2005 $here much o! the blame $as put on the greedy culture o! 6all &treet and put an e#ceedingly amount o! bro%ers out o! $or%, even prompting )ay 7eno host o! the Tonight Show to (o%e 8My &toc%bro%er as%ed me something very important today: paper or plastic+9 1espite the ma(or hit the !inancial services industry too% a!ter 2005, stoc%bro%ers still seem to not only recover, but thrive, $hich has been a trend that has been prominent throughout history, $here bro%ers continually bounced bac% a!ter 'he :reat 1epression and the stoc% mar%et crash o! 1;52 Benefits of hiring a Stockbroker In order to purchase securities, commonly re!erred to as stoc%s, some type o! bro%erage is al$ays re<uired 'hese are divided into !ull service stoc%bro%ers and discount bro%ers Full service bro%ers are the pro!essionals and :oldman &achs gurus o! the $orld that personally use their e#pertise to help pic% stoc%s and manage their client"s port!olio 1iscount bro%ers are typical online accounts such as E-Trade that charge much less commission !or their services due to lo$ overhead costs 'his section o! the essay $ill discuss the bene!its o! having a !ull time

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service *ro%er that provides services above and beyond e<uity sales 'he !irst %ey advantage is that a !ull time bro%er can ma%e investment recommendations !or their clients 0 success!ul stoc%bro%er is clearly able to assess investment goals, create a timeline, and determine ho$ much money their client $ishes to invest 'his is an advantage to the 0verage )oe investor because the bro%er has typically devoted their $hole career to learning about di!!erent types o! investments and has many more resources and %no$ledge available to their disposal 0nother %ey advantage is that a bro%er can help maintain and manage their client"s port!olio 'he bro%er $ill go over their client"s investment goals to determine the direction and plan in $hich they should set 0 typical trait success!ul stoc%bro%ers also possess is that they can have a broad vision !or their clients port!olio and share the %no$ledge they have attained to their clients in order to bene!it all parties Cons of hiring a stockbroker 6hen it comes to hiring a !ull service bro%er there are t$o main disadvantages that must be ta%en into consideration 'he !irst one is that bro%ers ta%e a percentage o! money o! every trade their client ma%es 'his can add up <uic%ly especially $hen investing large amounts o! money, $here according to 1r Ed$in :hiselli, a pro!essor at the .niversity o! Cali!ornia at *er%ley, one must beat the mar%et by 2 => (ust to ma%e a pro!it $hich is increasingly harder to do in an economic do$nturn /o$adays one can save a large amount o! money using the $ide range o! online discount bro%ers that charge much less commission 'he second one is that bro%ers can easily ta%e advantage o! their clientele by utili?ing their e#ceptional sales ability to invest in stoc%s that are o! poor value (ust so they can receive their commission chec%s 'his e#ample is easily depicted in the earlier mentioned bo# o!!ice hit The Wolf of Wall Street. 7ead character )ordan *el!ort manipulated clients into buying penny stoc%s that are almost all o! the

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time lo$ <uality stoc%s that are e#tremely volatile due to being traded at such lo$ price points *el!ort $ould drive their prices up by getting his clients to invest a great amount o! money in these stoc%s there!ore driving the prices s%y@high and $ay past their true value, at the same time *el!ort $ould also create accounts in other names $here he $ould simultaneously be short selling these stoc%s $hen they reached pea% prices and then proceed to pull all o! the money out o! the stoc%s causing himsel! to gain enormous pro!it $ith the declining prices $here his clients that invested into them long term $ould lose almost all o! their o$n money, this is commonly re!erred to as a boiler room Traits of successful stockbrokers :ood bro%ers are in as high o! demand as ever Anly 22> o! investors actually beat the mar%et and the 1o$ )ones Industrial 0verage ,C//- In order to turn into one o! the multi@ millionaire 6all &treet big shots that all bright eyed M*0 graduates dream o!, one must possess a !e$ %ey traits that are vital to success 6hile the stories mentioned be!ore o! corruption and schemes $here $ealthy bro%ers s$indle their clients out o! money, this is an absolute rarity and is almost al$ays caught by the !ederal government In order to truly be success!ul, bro%ers must achieve their number one goal o! gro$ing their clients port!olio I! the bro%er is doing a poor (ob o! ma%ing their clients money they $ill <uic%ly lose these clients and develop a poor reputation that is hard to recover !rom &toc%bro%ers are $eeded out <uic%ly and must endure long hours and high pressures especially in the !irst !e$ years o! their career It is important to develop a deep understanding o! the mar%et, it ta%es years o! studying and hands on e#perience to get a grasp o! ho$ the stoc% mar%et $or%s and start to discover its pattern o! behaviors &trong interpersonal and communication s%ills are also necessary in order to thrive 0 stoc%bro%er"s paychec% depends on their ability to sell people, especially those o! high net $orth that include

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CEA"s o! corporations that may be hard to reach Many times one must go through their secretary !irst $ho has the po$er to put them through or not, it is the bro%ers (ob to charm their $ay into strong relationships $here a client chooses them over the vast variety o! their competition 0 good stoc%bro%er must %no$ ho$ to handle re(ection 'he ma(ority o! their business is calling prospective clients on the phone trying to get them to give their money to a random stranger, !or every account they open they are re(ected a countless number o! times, persistence is %ey and the best ma%e it di!!icult !or those people to say no 0nother role a stoc%bro%er plays is being able to e#plain concepts that may be hard to grasp 'he average investor has very little idea o! ho$ or $hy the mar%et moves the $ay it does and it can be di!!icult to e#plain the speci!ic (argon and %ey terms that are used in the investing realm It is not necessary to hold any degree to become a stoc%bro%er, ho$ever no$adays many employers $on"t even let you in the door $ithout an M*0 !rom a top target school, competition is !ierce and one must be able to di!!erentiate themselves one $ay or another, this includes investment e#perience or that o! similar (obs that hold a bac%ground in !inancial services 7astly, the best stoc%bro%ers possess a sic%ening $or% ethic, it is common !or bro%ers to $or% $ell over 100 hours a $ee% ,6all &treet )ournal 200;-, only the most dedicated rise to the top, i! one can provide that $ith a high intellect and %nac% !or investing, they have a bright !uture ahead o! them as a stoc%bro%er