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Stockbroker Interview Questions

POSITION SUMMARY

The primary focus of a Stockbroker is to manage the financial portfolio of a client. Clients can range from individuals to large businesses. Depending on the needs of the client, Stockbrokers can perform different job functions. Stockbrokers can act independently, managing portfolio decisions on the client’s behalf. They can act in a consulting capacity by advising client’s on when they should buy or sell. Or they can act at the client’s discretion, only buying or selling when instructed to.

Buying and selling stocks is not for the faint of heart. They handle vast amounts of money and work personally with their clientele. Stockbrokers must constantly be on the job in order to keep a finger on the pulse of the stock market and must be prepared to make quick decisions in order to turn a profit for clients.

RESPONSIBILITIES

Stockbroker responsibilities may include:

  • Create and update client lists in order to maintain steady business.
  • Conduct market research and analysis. 
  • Give presentations and reports to clients about their investments.
  • Stay on top of daily trends within the market in order to best serve their clients.
  • Buy and sell stocks quickly in order to make the maximum amount of profit possible.


SKILLS

Stockbrokers are expected to be quick-thinking and light on their feet. In order to stay on top of current events and make well informed decisions, a skilled Stockbroker will:

  • Possess superior salesmanship qualities in order to convince potential clients to entrust their money to them.
  • Network both in and out of the job in order to constantly expand their list of clients.
  • Stay up to date on current events as they happen immediately.
  • Communicate effectively with clients in order to best evaluate how their money should be invested.
  • Possess superior time management skills in order to juggle multiple clients while managing day to day tasks.


QUALIFICATIONS

Most employers will look for applicants with at least a Bachelor’s degree in finance or a related field. However, possessing an MBA will serve to set potential candidates apart from other applicants and help secure higher management roles later on. It varies depending on state, but as general rule, applicants should also plan to test for the FINRA Series 7 and at least the 63 Securities Registration. 

In addition, applicants can make themselves more attractive by seeking professional qualifications with organizations like the Chartered Institute of Management Accountants or the CFA Society. 

If you’re getting ready to interview for a position as a Stockbroker, you can prepare by researching the company as much as possible. Learn about the 9 things you should research before an interview.

 

SALARY 

Salaries for Stockbrokers range between $67K to $98K, with the median being $78K. 

Factors impacting the salary you receive as an Stockbroker include:

  • Degrees  (Bachelors, Masters)
  • Years of Experience
  • Location
  • Reporting Structure (Seniority of the Manager you Report to, Number of Direct Reports)
  • Level of Performance - Exceeding Expectations
 
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STOCKBROKER SAMPLE INTERVIEW QUESTIONS

Question: Can you explain the difference between the primary market and a secondary market?

Explanation: This is a type of technical question.  As a licensed stockbroker, you should expect that most of the interview will consist of technical questions.  These are meant to explore the depth of your knowledge in this field and to ensure you have the background to be successful in this role.

Example: “The main difference between a primary and a secondary market is that in the primary market, an investor can buy securities directly from the company through the company’s initial public offering, or IPO. The secondary market is where the subsequent trading of securities is done.  In the secondary market, investors and traders buy securities from other investors willing to sell the same. A variety of trading instruments are available in the secondary market.”


Question: What is the structure of the Over The Counter market?

Explanation: This is another technical question which the interviewer will ask to ensure that you understand the terminology stockbrokers use.  Technical questions are best answered straightforwardly and succinctly. The interviewer will ask a follow-up question if they need additional information.

Example: “The Over The Counter market, or OTC, is a decentralized market with no physical location. It is where participants execute trades with one another through channels, including telephone, e-mail, and proprietary electronic trading systems.  Stocks of lesser-known companies are typically traded on the OTC.”


Question: Can you explain what ETFs are and what advantages they have over stocks?

Explanation: Yet another technical question.  Many of the questions you will be asked as a stockbroker involve comparing different types of equities, transactions, or terms.  You should be able to define each of these and then state the advantage one may have over another in a specific situation.

Example: “ETFs are Exchange Traded Funds. They consist of funds that track the indexes like the entire market, such as the NASDAQ, DOW JONES, and S&P or sectors of these markets, such as the S&P High Tech sector. They have a structure similar to a mutual fund, but they trade like a stock.  The advantage of ETFs is that they provide more diversification and lower risk than an individual stock but are more liquid than a mutual fund.”


Question: Can you describe some of the characteristics used to set up a mutual fund?

Explanation: This is a more in-depth technical question.  As the interview progresses, the questions will become more difficult or specific in nature.  This occurs because the interviewer is gaining confidence in your capabilities and wants to learn more about your skills and experience.

Example: “Mutual funds can be set up to achieve many different investment strategies or objectives.  This provides the investor with options that will match their personal investment strategies and objectives.  Examples of mutual fund structures include long or short target maturity periods, closed and open-ended objectives, growth, balanced, or income objectives, liquid and tax saving funds.”


Question: What are preferred shares of a company’s stock, and why are they beneficial for some investors?

Explanation: In some types of technical questions, you will be asked for a definition of a term and then an explanation of its benefits or use in your profession.  The best way to prepare for interviews involving technical questions is to study a guide like this one. You should practice these questions out loud so that you become comfortable providing answers to them.

Example: “A preferred share of a company’s stock is a share that provides the investor a stake in the issuing company.  Holders of preferred stock take precedence over investors with standard shares and will receive benefits such as dividends first.  They will also receive some payment before other debtors and holders of a standard share if the company chooses to liquefy its assets.  Preferred shares cost more than standard shares, which is why they receive these benefits.”


Question: What is the dividend, and how do they impact the price of a stock?

Explanation: Again, the interviewer is asking a more in-depth technical question to see if you understand how one characteristic of a stock impacts another characteristic.  You should be able to answer this question easily if you practiced these questions and reviewed the terminology used by a stockbroker before the interview.

Example: “Dividends are a share of the company’s profits which are distributed to holders of the company’s stock.  Companies can elect to pay dividends rather than use the profits for other purposes, such as investing in the company’s infrastructure or acquiring another company.  The impact of a dividend on the company’s stock share price is that it lowers the price because the dividend is considered part of the investor’s return on the stock.  However, consistent dividends or increases in the amount of the dividend indicates a company’s strength and may increase the stock price.”


Question: Can you explain the term “ROE” and how it is used by investors to analyze a stock?

Explanation: This is another question that involves providing the definition of a term used by stockbrokers and then explaining how it is used in this industry.  When responding to the interviewer's questions, make sure you answer the entire question just as it is asked. Leaving out anything or answering only part of the question could impact the interviewer’s perception of your qualifications for this job.

Example: “The term ROE stands for Return On Equity, it is a measure of the profitability of a company and indicates how much profit a company generates for each share of the shareholders' equity. ROE is calculated by dividing the net income a company generates by the number of individual shares outstanding and owned by investors in the company.”


Question: Explain what is the difference between equity financing and debt financing?

Explanation: This question asks you to compare different types of financing a public company may use.  Knowledge about this topic is important for stockbrokers because it helps them to analyze a company’s financial health.  Clients depend on stockbrokers not only to execute trades for them but also to provide them investment advice. Knowing the answer to this question indicates that you have the skills.

Example: “Companies obtain the financing needed to operate their business by either issuing stock in the company to investors in return for funding or taking out loans.  Issuing stock is known as equity financing. Taking out a loan is debt financing. Each of these methods can be broken down further depending on the nature of the shares issued to investors or the type of loans obtained from lenders.”


Question: Can you explain what Net Asset Value (NAV) is and how it is used to analyze an investment fund?

Explanation: Yet another question of a technical nature asking you to define a term and describe how it is used in the investment industry.  By now, you should recognize these types of questions and be able to formulate your answer to them immediately.

Example: “Net Asset Value or NAV is defined as the value of one unit of a fund, such as one share of a mutual fund or ETF. It can be calculated by first totaling the assets of the fund, including the current market values of all securities held by the fund. You then subtract any liabilities, including the expenses related to operating the fund. Finally, you divide the net value of the fund by the number of investor’s shares outstanding.”


Question: Why would a company seek private equity investments rather than issue public shares of stock that can be purchased by anyone and traded on an exchange or market?

Explanation: This question is counter-intuitive because it doesn’t involve the type of transactions or investment advice stockbrokers are typically engaged in.  However, as a stockbroker, you should know about this because private equity impacts the financial markets and investment activities related to public companies.

Example: “There are many reasons a company may prefer private equity over issuing publicly traded stock.  These include the difficulty of raising capital in the public markets, less regulation, the effect that public markets have on the company’s behavior and performance, and the ease of financing the company through the use of private equity firms.  The limitation of private equity is that the firms providing the investments have more influence on the company’s operating structure and strategic decisions.”


ADDITIONAL STOCKBROKER SAMPLE INTERVIEW QUESTIONS

  • How do you maintain new accounts and how would you revive a dormant account?

  • Are there any important trends you see in the industry and market? If so, what are they?

  • Why is paper trading used in stock markets?

  • Can you explain the two types of orders traders may place in equity trading?

  • What is a blue chip stock?

  • How would you explain what the stock market is and how it functions to a new client?

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