Brokers, like other professionals such as doctors, certified
public accountants (CPAs), and lawyers, are required to have licenses
to conduct their jobs. The qualifications required to obtain
a broker’s license, though, are significantly fewer than in other

Being a medical doctor requires a person to concentrate his
undergraduate years in the sciences followed by many years of more
specialized and expensive schooling. After schooling comes the residency
program that culminates in a rigorous licensing agenda.

Becoming a lawyer requires three years of law school. Law
school is neither easy to get into nor cheap to attend. Then there
is the dreaded and grueling bar exam, which may have to be passed
in more than one state, depending on where the lawyer intends
to practice.

For CPAs, almost all states require a college degree plus a number
of years of experience depending on whether the degree was in
accounting. And, of course, state licensing is also demanding.

In Chapter 13, we discuss what traits and business practices
make a good stockbroker from the customer’s point of view. But
for now, let’s discuss what qualifications are needed to become a

Unlike doctors, lawyers, and CPAs, stockbrokers need have no
special schooling or training to be hired by a brokerage firm, other
than acquiring the NASD Series 7 license. Being a stockbroker requires
no formal education at all. A high school dropout could be
a stockbroker! Seriously, you would probably be surprised at how
many stockbrokers have never attended college. In addition, an
NASD rule prohibits persons convicted of financial-related crimes
from being stockbrokers, but only if the conviction occurred within
the last ten years.2 There is no special area of expertise that brokers
are required to have other than being a good salesperson.

The following is a list of qualifications that brokerage firms
look for when hiring someone who has not previously worked as a
• The ability to sell
• The ability to sell
• The ability to sell

To a brokerage firm branch manager or sales manager, who
many times conducts the initial interview, the ability to sell is the
primary qualification. Although some firms have much stricter standards
than others when it comes to new hires, virtually every trait
or attribute that is examined by the brokerage firm relates back to
the question, Will this attribute enable the applicant to sell? With
that in mind, we finish the list of qualifications firms seek:
• A proven track record of selling (not necessary but a big plus)
• A great communicator, which means the ability to talk on the phone
• Confident, slick, vocal, gutsy—call it what you will. It is
the ability to call a total stranger in the middle of her dinner
and convince her to invest thousands of dollars in a
company she has never heard of.

It was 1980 and as the rest of Dallas settled in for their favorite
television show on a Tuesday night, Douglas sat in a brightly lit office
with a handful of applicants in a closed and darkened Merrill
Lynch office in north Dallas. He and the others had made it through
the initial interview process at Merrill and now were being put
through “the sales test” to become a Merrill Lynch stockbroker. Each
applicant was given a desk, an investment to peddle, and a card that
contained a limited amount of information on the prospects they
were about to call. Merrill was measuring Douglas’s ability to sell intangibles
to strangers. It’s funny to think that not much has
changed over time. Twenty years later, the identical sales process
was depicted in the movie Boiler Room. That criticism aside, Merrill
Lynch has an excellent training system in place.

What qualifications or traits are not important to the brokerage
industry when reviewing stockbroker applicants? They are:

• Appearance (The majority of stockbrokers never see their
• Intelligence (The major wirehouses create and promote the
products and investments they want their brokers to sell;
thinking and researching only limits the time the broker
could be selling.)
• Knowledge of finance or investments (Likewise, brokerage
firms provide this information to the broker, figuring that if
the broker can pass his Series 7 exam, that’s good enough.)
• Level of education or education emphasis
• Previous employment unless sales related

The qualifications change dramatically if a broker is going
from one brokerage firm to another. Then the following list of qualifications
would be important:
• Total number of accounts
• Total assets in dollars in those accounts
• Record of opening new accounts
• Total commissions generated in the previous year
• Ability to promise the world to his new manager
• Ability to sell

You may note one critically important item missing from this
last list: how much money the broker made for his customers. This
computation is not performed when brokerage firms evaluate stockbrokers.
Behind the walls of Wall Street, in fact, this calculation is
rarely, if ever, performed.

What we have illustrated is that there is little in the hiring
practices of brokerage firms or in the desired qualifications for stockbrokers
that relates to the best interest of investors.
Source: Brokerage Fraud: What Wall Street Doesn't Want You to Know

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