Seeing Gordon Gecko wheeling and dealing in Wall Street, the stock market might look a fun place to be. Thrilling it certainly is, but it’s not the place to be playing games. It’s a high-pressure environment in which financial fortunes can change in less than a minute.
Of course, this is finance and there’s money to be made. If you know your PERs from put options and your common stocks from closed-end funds, you may fancy setting up your own online brokerage and helping others less in the know (for a fee, naturally).
Here’s how you go about becoming an online broker.
Build knowledge and experience
Some businesses you can enter on the strength of knowledge alone and build up your experience from there. Brokering isn’t one of them. You’re dealing with other people’s money — and we’re not talking just a couple of quarters here — so you need to know exactly what you’re doing.
So first thing’s first: study finance. Then work at a brokerage firm. Between the two, you’ll come with an extensive knowledge of securities, the stock markets, and how they work.
As brokering is a licensed activity, you need to pass the Series 7 and Series 63 exams. You must also register with the Securities and Exchange Commission (SEC), a self-regulatory organization such as the Financial Industry Regulation Authority (FINRA), and the Securities Investor Protection Corporation (SIPC) too. Any business partners or employees who are brokering alongside you must also meet the qualification requirements.
Set up your brokerage website
Armed with knowledge, experience, and qualifications, now you need to set up a website. Your clients must be able to log in to the site and place orders. As well as being diligent in your duties, you can make your business successful by ensuring that your website is as easy to use as possible. Clients who can navigate the site and place orders hassle-free will use your site more often.
Compile personalized reports
Your clients aren’t just going to place an order and then forget about it. They’ll want to know how their investments are performing. Keep them in the know by sending them customized reports monthly or bi-monthly. Comment on not just their investment’s progress, but also on the market performance. Point out potential future investment opportunities, as do financial service companies like Interactive Investor. Just remember that events in the financial world can take a lightning-fast turn, so be very careful in your recommendations.
Be available
One of the big advantages of online brokering — besides the fact that you’re already saving your client money in phone calls by operating online instead — is the convenience for your clients. Your website should enable them to place orders when the traditional stockbrokers have all switched off their monitors and gone home.
So make sure that your client can place orders around the clock. Be sure to execute these orders promptly, as some may be urgent. And make sure they can contact you by email or through your website.
Setting up an online brokerage can work for you and for your clients. The extra availability that you offer them gives you a business edge over traditional brokers. However, you must take the endeavor seriously: time really is money. Be broad in your knowledge, extensive in your experience, and efficient in your execution. That’s a broker who means business!
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