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Taking Stock

A stock broker is the interface between the market and anyone who wants to play it. Anil Merani and Sanchita Guha report.

education Updated: May 23, 2012 11:38 IST

With the share scams of the ’80s and ’90s well behind us, dealing in stocks is now something almost everyone wants to do — from working students with disposable incomes to homemakers looking to invest. The one they all go to is the stock broker, the person who is the interface between the market and anyone who wants to play it, whether long-term or short.

Ashu Madan, President, equity broking, Religare Securities Limited, says, “There is no specific academic qualification required to be a stock broker. You need to have done something in finance — an MBA, a CA or a plain BCom. The most important thing is the knowledge of the market, for which one needs to read up a lot. You could even be from the arts stream and we’d hire you if you have the required understanding. That said, most stock brokers learn 90 per cent of the job on the field.” While a specific degree is not essential, a broker does need NSE and/or BSE certification to operate (see box).

Like everything else these days, a knack for marketing is important here, too, adds Madan. That simply means you have to get clients interested in doing business with you. And if you can gain investors’ trust, stock broking is a “very satisfying, paying and challenging profession”, Madan adds. Plus, the image of the stock broker is quite glamorous these days, a far cry from the ‘gambler’ who put people’s fortunes on the line.

With the rise in the number of high net worth individuals who need to have their huge share portfolios managed, the profession has a lot going for it. Need an example of how one can take the quick route to stock broking? Meet Ketan Malkan. Starting six years ago as relationship manager for India Infoline, a financial services provider, today Malkan is responsible for the high-value trading desk, with over 200 reportees.

Malkan attributes his success to having the right attitude and his knowledge of capital markets. “An ideal stock broker should provide (the client) a clear schedule of investment and the knowhow for building an investment portfolio,” he says. “He should not make tall promises. A winning stock broker has a definite plan and does his homework carefully. After understanding the mood of the market, he tries to identify the strongest stocks. The first step for a future stock broker is to take interest in trading.”

Commenting on the recent lows in the stock market and how it might affect the profession, Malkan says, “Clients understand that this phenomenon is not limited to India. And of late, things have become better.” Talking about the duties of a relationship manager, he explains, “An ideal RM would help a client in lean times by offering him other securities such as primary issues, mutual funds and insurance products, where the risk is low.” In other words, a good broker stays with his client through thick and thin.

what’s it about?
Stock brokering involves the buying and selling of shares for clients on commission basis. But most big broking firms don’t restrict themselves just to shares. They offer mutual funds, insurances, commodities, currencies and other financial products as well. Most firms recruit freshers as assistant relationship mangers (ARMs) and relationship managers (RMS). These professionals’ job is to be in constant touch with the clients, inform them of market movements and advise them on the amount of risk they should take. They are the one-point contact of the clients. They take orders from clients to buy and sell at specific rates. Besides working with existing clients, they also solicit more business for the company. An ideal RM would be someone who raises the clients’ net worth

The average day of an RM:

9 am - 10 am: Check pink papers and business channels. Update oneself on client positions. Have pre-market opening briefings with seniors
10 am - 3.30 pm: Buy/sell shares and other securities when markets open. Call up clients or receive calls about

3.30 - 5 pm: The market closes. Again call up clients to confirm orders on recorded lines. Visit clients to build

5 - 6 pm: Attend training sessions, which are organised to keep new recruits up to speed with new business and

There is no off time for an RM as s/he has to always be ready to interact with his/her clients

A relationship manger with an MBA in finance can draw Rs 2.4 lakh to Rs 4 lakh a year (depending on the firm). Non-finance RMs earn less. A good RM can rise to become a team leader, a zonal manger of a branch or an AVP

n Love for the markets. You should understand the pulse of the Sensex and the Nifty
n You should be a people’s person
n Trust and integrity are an absolute must, otherwise you can hurt the client’s prospects and the company’s reputation.
n You deal with people’s life savings, so giving the right advice is critical

How do i get there?
Most brokerage firms hire ARMs and RMs from noted MBA institutes. In addition to your business degree, you could arm yourself with a certificate such as the NSE’s Certification in Financial Markets and BSE Certification on Derivatives Exchange. More details at http://www.nseindia.com/content/ncfm/ncfm_whyncfm.htm and http://www.bseindia.com/training/bcde_test.asp

Institutes & urls
n BSE Training Institute, Mumbai
n National Stock Exchange, Mumbai http://www.nseindia.com/content/ncfm/ncfm_whyncfm.htm
n Institute of Company Secretaries of India, New Delhi (PG course in capital market and financial services)
n The Indian Institute of Finance, New Delhi (Master of Business Finance)www.iif.edu
n Jamnalal Bajaj Institute of Management, Mumbai
n NMIMS University
n SP Jain Institute of Management & Research, Mumbai,

Pros & Cons
n The stock market is directly connected with economic growth, so higher GDP means higher salaries
n The market will eventually grow as India is on a growth trajectory
n One mistake can cost clients heavy, so pressure is high
n Dealing with clients in the bear run tests the mettle of an ARM/RM
n The work can affect family life

You Must be Positive

Learn what goes into the making of a stock broker, right from the horse’s mouth

What are the self-employment opportunities in this business?
You can branch out on your own by becoming a sub-broker for a big broker or become a franchise of a big brokering company. It’s not easy to become a full-fledged broker, as the card which allows you to trade is quite expensive. As a sub-broker, you will need to deposit a certain amount of money depending on the volumes you want to handle.

What knowledge do you require to be in this field?
You need to be fully aware how the markets function. That is, capital market and derivatives, knowledge of how the online trading system BOLT (BSE On-line Trading) works and front and back-end operations. Clients will have to maintain a ‘minimum margins requirement’ (pay a certain amount upfront for shares to avoid risk) etc. Hence, it is better to work for somebody for some time as you will then be equipped to start on your own.

How does one solicit clients?
You need to sign up clients by offering good and reliable service at attractive brokerage rates. You need to have a detailed understanding regarding their financial needs and risk potential. Different clients want different things, some want to trade long-term, some short-term or intra-day (buy and sell the same day). Clients also need to be tutored on the need to have a proper understanding of companies they invest in.

What risks are involved?
The biggest risk is to make sure that clients pay up, if they incur big losses. Hence, you need to ensure that they have sufficient margins or enough collateral. But if you play safe and have entrepreneurial skills, self-employment is good.
Finally, what counts is a positive and confident attitude. To achieve the best outcome, you need great planning, right execution and smart services. A good and brave human being will be a successful stockbroker and command the consistent trust of the investor. Good and bad periods in the market need to be accepted with grace. A successful stock trader possesses qualities of the head and the heart and is not unnerved by temporary setbacks.