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Securities and Commodities

Nature of the Industry  |  Working Conditions  |  Employment  |  Occupations in the Industry
Training and Advancement  |  Job Outlook  |  Earnings

Significant Points

• Half of all jobs in the industry are held by securities sales agents and management and financial operations workers, who generally have a college degree; the rest are mainly office and administrative support.
• Strong employment growth is projected to result from increasing investment in securities and commodities, along with the growing need for investment advice.
• The high earnings of successful securities sales agents will cause keen competition for these positions—particularly in larger firms.

Nature of the Industry

One of the most important functions of the industry is to facilitate the trading of securities and commodities by bringing together buyers and sellers. Brokerage firms typically provide this function. In these firms, investors place their buy and sell orders for a particular security or commodity by phone, online, or through a broker. The firm fills the order in one of three ways. If the stock or commodity is sold on an exchange, such as the New York Stock Exchange (NYSE) or the Chicago Mercantile Exchange (CME), the firm will send the order electronically to the company’s floor broker at the exchange, who will post the order and execute the trade by finding a seller or buyer who offers the best price for the client. Alternatively, if a security is sold through a dealer network, such as Nasdaq, the broker can access a computer network that lists the prices that dealers in that security are willing to buy or sell it for. If a price that the client agrees with is found, then a purchase or sale is made. Large investors and brokerage firms also can buy and sell securities and commodities on “electronic communications networks,” or ECNs. ECNs are very powerful computers that automatically list, match, and execute trades, eliminating the middleman. ECNs commonly are used for stocks that trade frequently and in large numbers.

Brokerage firms generally are classified as full-service, discount, or online. Investors who do not have time to research investments on their own will likely rely on a full-service broker to manage their investments or make recommendations on which investments to buy. Full-service brokers have access to a wide range of reports and analyses from the company’s large staff of financial analysts. These analysts research companies and make recommendations on which investments are best for people with different savings and investment needs. Discount and online brokerage firms do not offer advice about specific securities; rather, they encourage clients to make their trades over the Internet or through other electronic means in order to keep costs down and fees low. Discount brokerage firms usually have branch offices, while online firms do not. Most brokerage firms now have call centers staffed with both licensed sales agents and customer service representatives to take orders and answer questions at all hours of the day.

Brokerage firms also provide investment banking services; that is, they act as an intermediary between those companies or governments that would like to raise money and those with money or capital to invest. Investment banking usually involves the firm buying initial stock or bond offerings from private companies or from Federal, State, and local governments, and in turn selling them to investors for a potential profit. This service can be risky, especially when it involves a new company selling stock to the public for the first time. Investment bankers must try to determine the value of the company based on a number of factors, including projected growth and sales, and decide what price investors are willing to pay for the new stock. Investment bankers also advise businesses on merger and acquisition strategies and may arrange for the transfer of ownership.

Companies that specialize in providing investment advice and portfolio management also are included in this industry. These companies range from very large mutual fund management companies to self-employed personal financial advisors, or financial planners. They also include managers of pension funds, commodity pools, trust funds, and other investment accounts. Portfolio or asset management companies direct the investment decisions for investors who have chosen to pool their assets in order to have them professionally managed. Many brokerage firms also provide these services. Personal financial advisors also can manage investments for individuals, but their main objective is to provide a formal financial plan that meets a wide range of financial needs.

A relatively small number of professionals in the industry work in the exchanges, where the actual trading of securities and commodities takes place. Computers and their applications have made brokers in the exchanges much more productive and capable of handling ever-increasing volumes of trades.

Firms in this industry offer a number of other services. Many offer cash-management accounts that allow account holders to deposit money into a money market fund against which they can write checks, take out margin loans, or use a debit card. Some brokerage firms offer mortgages and other types of loans and lines of credit. They also may offer trust services and help businesses set up benefit plans for their employees. They may sell annuities and other life insurance products.

The securities and commodities industry has invested heavily in technology, which is allowing firms to handle larger volumes of trades with fewer people. The growth of online trading, in particular, has produced a number of online trading firms that did not exist just a few years ago. In order to compete, many full-service brokerage firms are now offering online trading to their customers. This explosion in technology is changing the nature of many of the jobs and the mix of people employed by securities firms. Some companies are more likely to resemble information technology (IT) companies than securities firms, with most of the employees working in computer-related occupations. Across the industry, computer professionals are accounting for a greater proportion of the workforce. And with so much business now being conducted online and through call centers, traditional sales agents are spending less time processing orders and more time seeking out new clients and offering detailed advice.

Employment in each of the segments of the securities and commodities industry is directly affected by the activity of the stock and futures markets and the savings and investment goals of individuals. Because these factors are largely determined by the strength of the economy, the industry prospers during good times and when interest rates are low, but is more adversely affected by downturns than many other industries.

Working Conditions

Most people in this industry work in comfortable offices; however, long hours, including evenings and weekends, are common. Nearly 1 in 4 employees worked 50 hours per week or more in 2000. Even when not working, professionals in this industry must keep abreast of events that may affect the markets in which they specialize. Opportunities for part-time work are limited—only 8 percent work part time. In 1999, the industry had only 0.6 injuries and illnesses per 100 full-time workers. Working conditions vary by occupation. 

Securities sales agents who deal mostly with individual investors and small businesses often work in branch offices of regional or national brokerage firms, or for a small brokerage or financial planning firm. New sales agents work long hours, mostly soliciting customers. During the day, they are on the phone continually with prospective customers, while at night they may attempt to generate new business by giving classes or seminars or by attending community functions. New sales agents also spend many hours studying to pass a variety of tests that will qualify them to sell other investment products, such as commodities or insurance. Although established agents work more regular hours, all agents meet with clients in the evenings and on weekends, as needed. 

Sales agents who actually perform the buying and selling of securities and commodities may have one of the most hectic jobs of any profession. Often called traders, market makers, dealers, or floor brokers, they work on the floors of exchanges or at a computer that is linked to other traders. They not only take orders from clients and try to get the best price for them, but must also constantly keep an eye on market activity and stay in touch with other traders and brokers to know what prices are being offered. 

Increasingly, sales agents for many of the brokerage and mutual fund companies work in call centers, opening accounts for individuals, entering trades, and providing advice over the phone on different investment products. Although many simply respond to inquiries and do not actively solicit customers, others may be required to contact potential clients. Call centers also employ a large number of customer service representatives, who answer questions for current clients about their accounts and make any needed changes or transfers. All workers in call centers must maintain a professional and courteous attitude and be able to speak for long periods of time. Many call centers operate 24 hours a day, 7 days a week, and employees may be required to work evenings and weekends. 

Jobs in investment banking, including those of financial managers, analysts, or assistants, generally require the longest hours—often 70 to 80 hours per week—in addition to extensive travel. In this area, there is a great deal of pressure to meet deadlines and acquire new business. Researchers, financial analysts, and investment managers working for brokerage and mutual fund firms also work long hours, researching and evaluating companies and their markets. Frequent travel to visit companies is common. 

Personal financial advisors work in offices or out of their homes. Most work regular business hours, but many accommodate clients by visiting them at their homes in the evenings or on weekends. Administrative support workers usually work a 40-hour week, but overtime may be necessary during times of heavy trading. 

Employment

The securities and commodities industry employed 748,000 wage and salary workers in 2000. An additional 125,000 workers were self-employed. With their large networks of retail sales representatives located in branch offices throughout the country, the large nationally known brokerage companies employ the majority of workers in this industry (see chart). The headquarters of many of these firms, in which most executives and administrative support personnel are employed, are located in New York City. Many people also work for mutual fund management companies and smaller regional brokerage firms. As a consequence of deregulation, banks have been either acquiring securities firms or adding securities and commodities business to their list of services, and are becoming a factor in the industry. A relatively small number of employees work at securities or commodities exchanges—primarily the New York Stock Exchange, the Chicago Board of Trade, the Chicago Mercantile Exchange, and a number of regional exchanges.

Occupations in the Industry

Securities, commodities, and financial services sales agents account for 1 in 4 wage and salary jobs in this industry (table 1). Although the occupation encompasses a variety of job titles and activities, all of them involve placing orders or buying and selling securities, commodities, or other financial services. The most common types of sales agents deal directly with the public and often are called retail brokers, account executives, registered representatives, or financial consultants. Securities brokers typically buy and sell stocks, bonds, mutual funds, and other financial services, while commodities brokers primarily deal with futures contracts on metals, energy supplies, agricultural products, and financial instruments. 

When a client places an order for one of these items, brokers relay the order through the firm’s computers to the floor of an exchange, to a dealer, or to an ECN. Upon confirmation of the trade, the broker notifies clients of the final price. As part of their job, brokers often provide advice to clients about possible investments, taking into consideration the client’s financial situation, tolerance for risk, and savings needs. Because sales is one of their major responsibilities, brokers also spend a considerable amount of time soliciting new business. 

A small number of sales agents deal exclusively with large investors, such as insurance companies, pension funds, and mutual funds. They typically are called institutional representatives or institutional brokers and provide many of the same services as a retail broker, but on a larger scale. 

Sales agents referred to as traders, market makers, and floor brokers actually make the trades on the exchange floor or over the computer. They match buyers and sellers of a particular security or commodity, sometimes using their own or their firm’s money to close the deal. 

Keeping track of transactions and paperwork constitutes a large portion of the work in this industry, which is why its largest occupational group is office and administrative support workers. Brokerage clerks, the largest occupation in this category, handle much of the day-to-day operations within a brokerage firm. The largest group of brokerage clerks, called sales assistants, take calls from brokers’ clients, write up order tickets and enter them into the computer, handle the paperwork for new accounts, inform clients of stock prices, and perform other tasks as needed. Some sales assistants obtain licenses to sell securities. This allows them to call brokers’ clients with recommendations from the broker on specific investments. Other brokerage clerks may compute transfer taxes and dividends and keep daily records of transactions and holdings. At some companies, a number of brokerage clerk positions are considered entry level, with promotion potential to securities sales agent jobs or other higher level jobs. 

Because more clients are choosing to trade without the use of sales agents or brokers, customer service representatives are playing a larger role in securities firms. While some may have licenses to sell securities or other financial products, most are not in the business of sales or offering advice, but mainly take questions from current customers. Customer service representatives usually work in central call centers, where they handle account transfers, redemptions, and address changes; answer tax questions; and help clients navigate the website, among other services. 

Management, business, and financial occupations account for 31 percent of total employment, a larger proportion than in most industries. This category includes a myriad of people with expertise in finance and investment polic, accountants and auditors, who prepare the firm’s financial statements; and general managers, who run the business. Financial analysts generally work in the research and investment banking departments. They review financial statements of companies, evaluate economic and market trends, and make recommendations concerning the potential profits from investments in specific companies. They may also attempt to determine fair market values for companies wishing to trade their stocks publicly or for those firms involved in mergers or acquisitions. Analysts in large firms usually specialize in a certain industry sector, such as transportation or utilities, or in a market, such as government financing. 

Personal financial advisors , also called financial planners, provide advice to both individuals and businesses on a broad range of financial subjects, such as investments, retirement planning, tax management, and employee benefits. They may take a comprehensive approach to the client’s financial needs or address only a specific issue. Advisors also may buy and sell financial products, such as stocks, bonds, mutual funds, and insurance, for their clients. 

Financial managers a re employed throughout the industry, preparing financial documents for the regulatory authorities or directing a firm’s investment policies. In many departments, managers act as senior advisors and oversee teams of junior analysts or brokers while continuing to be actively involved in working out deals with clients. 

Portfolio managers and commodity trading advisors are responsible for making investment decisions for clients with large sums of money to invest. These clients include mutual funds, pension funds, trust funds, commodity pools, and high net worth individuals. Portfolio managers must know the investment goals of the client and ensure that the investments they make meet those goals. 

The increasingly computerized environment in this industry requires the expertise of computer software engineers , database administrators, Web developers, and other computer professionals to develop and operate the communications networks that provide online trading. 

Training & Advancement

This industry has one of the most highly educated and skilled workforces of any industry, and the requirements for entry are high—even brokerage clerks often have a college degree. The most successful workers at all levels have an aptitude for numbers and a very keen interest in investing. In addition, most people in this industry are required to be licensed by the National Association of Securities Dealers (NASD) before they can sell securities or recommend specific investments. To be licensed, brokers and assistants must pass an examination that reflects their knowledge of investments. Various licenses are available for different investment products. However, the one most brokers and broker’s assistants receive is the “Series 7” license, which requires a passing score on the General Securities Registered Representative Examination administered by the NASD. Since 1995, the NASD has also required all registered persons to undergo a continuing education program approximately every 3 years in order to retain their licenses. Classes consist of computer-based training in regulatory matters and training on new investment products. 

A number of professionals in this industry begin their careers as brokerage clerks. Depending on the actual job, brokerage clerks can be high school or college graduates. Positions dealing with the public, such as broker’s or sales assistant, and those dealing with more complicated financial records, are increasingly held by college graduates. In addition, these jobs require good organizational ability, phone skills, and attention to detail. A Series 7 brokerage license can make a clerk more valuable to the broker because it gives the assistant the ability to answer more of a client’s questions and to pass along securities recommendations from the broker. Clerks may be promoted to sales representative positions or other professional positions. Some of the larger firms have training programs, especially for their college graduates, to provide clerks with the skills needed for advancement. 

A college education, although not essential, is increasingly important for securities, commodities, and financial services sales agents because it helps them to understand economic conditions and trends. In fact, the overwhelming majority of entrants to this occupation are college graduates. Still, many employers consider personal qualities and skills more important than academic training. Employers seek applicants with good communication skills, a professional appearance, and a strong desire to succeed. Securities, commodities, and financial services sales workers must meet Federal and State licensing requirements, which generally include passing an examination and a background investigation and, in some cases, furnishing a personal bond. Most of the large brokerage firms provide formal classroom training for new brokers that can last a couple of weeks to several months. Smaller firms usually rely on informal on-the-job training. 

Although there are no specific licensure requirements to be a personal financial advisor, most advisors must be knowledgeable about economic trends, finance, budgeting, and accounting. Therefore, a college education is important. Personal financial advisors must possess excellent communication and interpersonal skills to be able to explain complicated issues to their clients. Many personal financial advisors earn a Certified Financial Planning (CFP) designation issued by the CFP Board of Standards in Denver, Colorado, or a Chartered Financial Consultant (ChFC) designation offered by the American College in Bryn Mawr, Pennsylvania. To receive these designations, a person must pass a series of exams on insurance, investments, tax planning, employee benefits, and retirement and estate planning; have the required experience in related jobs; and, in the case of the CFP, agree to abide by the rules and regulations issued by the Board of Standards. It may take from 2 to 3 years of study to complete these programs. 

Entry-level analyst and other managerial support positions usually are filled by college graduates who have majored in business administration, marketing, economics, accounting, industrial relations, or finance. Many of the large companies have management training programs for college graduates in which trainees work for brief periods in various departments to get a broad picture of the industry before they are assigned to a particular department. Those working as financial analysts are encouraged to obtain the Chartered Financial Analyst designation sponsored by the Association of Investment Management and Research. To qualify, applicants must have at least 3 years of qualifying experience and pass a series of rigorous essay exams requiring an extensive knowledge of many areas, including accounting, economics, and securities. 

Advancement opportunities in the securities and commodities industry vary by occupation. To advance into the managerial ranks or to get some of the more lucrative and prestigious jobs on Wall Street, a master’s degree is increasingly becoming essential. In investment banking, for example, most firms select the top candidates from the Nation’s most prestigious business schools. However, because many business schools accept master’s degree candidates only if they have some job experience, many securities firms hire analysts with a bachelor’s degree and provide them with the experience they need, assuming that they will eventually obtain their master’s degree. 

The principal form of advancement for securities, commodities, and financial services sales agents is an increase in the number and size of the accounts they handle. Some eventually manage the assets of clients. Although beginners usually service the accounts of individual investors, a select few eventually may handle very large institutional accounts. Administrative support workers such as brokerage clerks may advance to sales agent positions or to other professional positions. Financial analysts may advance to positions in management, in which they may manage investment portfolios or negotiate investment banking deals. 

Job Outlook

Wage and salary employment in the securities and commodities industry is projected to rise 20 percent from 2000 to 2010, faster than the 16-percent increase expected for all industries in the economy. Job growth will be fueled primarily by the increasing levels of investment in securities and commodities in the global marketplace. So long as interest rates remain low and the stock market performs adequately, people will continue to seek higher rates of return by investing in stocks, mutual funds, and other investments. In addition to the many new job openings stemming from this growth, a large number of openings will arise as people retire or leave the industry for other reasons. 

Several trends bode well for the industry through the next decade. Baby boomers are in the middle of their peak savings years and are putting money into a number of tax-favorable retirement plans, such as the 401(k) and the Roth IRA. These plans have been one of the major causes of huge inflows of money into the stock market and into mutual funds, and this trend towards saving for retirement is expected to continue. 

Also, although online trading will grow and reduce the need for direct contact with an actual broker, the number of securities sales agents is still expected to grow fast, as many people still are willing to pay for the advice that a full-service representative can offer. Competition for securities sales agent jobs, though, usually is keen because the job attracts a large number of qualified applicants. Job opportunities for sales agents should be best for mature individuals with successful work experience. Employment of personal financial advisors will grow faster than average. As the number of self-directed retirement plans increases and as the number and complexity of investments rises, individuals will require more help in managing their money. 

Another factor contributing to projected employment growth is the “globalization” of securities and commodities markets—the expansion of traditional exchange and trading boundaries into new markets in foreign countries. This, in turn, has provided an expanding array of investment opportunities and access to markets in which new financial products are now available to domestic investors. These new products and markets encourage trading and prompt firms to hire more workers. 

Demand for financial analysts should remain strong in the investment banking field, where they will be needed to assist new high-technology companies in raising money. In addition, the number of mergers and acquisitions taking place in the economy is not expected to slow down appreciably, so financial analysts will be needed to assist with these types of activities. Competition for entry-level analyst positions in investment banking typically is intense, as the number of applicants usually far exceeds the number of vacancies. 

Due to advances in telecommunications and computer technology, the securities and commodities industry has become highly automated. This automation is expected to cause rapid growth in employment of computer software engineers, systems analysts, database administrators, and other computer support specialists. On the other hand, automation has resulted in computerized recordkeeping of transactions, more productive administrative support staffs, and enhanced communications among foreign firms. Accordingly, employment of brokerage clerks and secretaries will decline, and employment of bookkeeping, accounting, and auditing clerks is projected to grow more slowly than the average for this industry.  

Earnings

Personal financial advisors are compensated in a number of ways. Those who manage client’s assets usually collect a percent of the assets as their fee. Others charge hourly fees and some charge different rates depending on the type of plan requested. Many receive commissions based on the financial products they sell. Those who work for financial services firms may receive a salary.

For many in this industry, a large part of earnings come from annual bonuses based on the success of the firm. Profit-sharing and stock options also are common. Salaried employees are more likely to receive typical benefits, such as paid vacations, sick leave, and pension plans, than are self-employed workers.

Source: Career Guide to Industries, Bureau of Labor Statistics

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