Where Did the Broker Go: Trading Apps ‘Killed’ Once Popular Profession

Popular culture and films like the famous ‘Wolf of Wall Street’ once portrayed brokers as financiers who ‘swim’ in money and decadently spend it. Although their earnings were far from their American counterparts, during the boom of the domestic stock market about 15 years ago, one could live well from this profession in Croatia. During those years, there was an anecdote about a Zagreb broker whose salary increase did not satisfy her, so she requested an official mobile phone, but not just any phone, rather an iPhone adorned with Swarovski crystals. However, significant technological development and major changes in financial regulation have fundamentally changed this profession, and today the number of new brokers entering the market can be counted on one hand.

Both Failed

To become a broker, you must first pass a demanding exam. This exam can be taken at the Croatian Financial Services Supervisory Agency (Hanfa). The annual report of this institution shows that the interest of candidates is almost symbolic, and the pass rate is not much better. Last year, only two candidates took the exam, and both failed. Two candidates also took the exam in 2022, but one passed. Five out of six candidates who applied passed the exam in 2021, while in 2020, out of five registered candidates, only two earned the title of broker. For illustration, in 2007 – the last year of the great renaissance of the domestic stock market – 196 candidates took the broker exam in the first round, of which 128 passed. In the second round, 52 candidates appeared for the exam, and thirteen showed a sufficient level of knowledge.

Hanfa explains that the exam consists of four subjects for the broker exam, and five subjects for the investment advisor test. Each subject contains ten questions, and in each subject, the candidate must have 60 percent correct answers to pass. – The test consists of questions with pre-provided answers to which it is possible to respond by selecting one or more correct answers based on prior knowledge and experience, as well as several questions that require certain calculations, but again with provided answers – they explain at Hanfa.

However, the exam at the financial market regulator is not the only way to become a broker, emphasizes Tamas Nagy, president of the Capital Market Group at the Croatian Chamber of Commerce. – In Croatia, the regulation governing the educational process for brokers and investment advisors is defined by the Capital Market Act and the regulations issued by Hanfa. According to current regulations, individuals wishing to become brokers or investment advisors must complete appropriate education and pass professional exams conducted by Hanfa. With the entry into force of the MiFID II regulation, the education process itself has been liberalized. In other words, investment firms, or banks, are able to conduct their own training programs whose curriculum is approved by Hanfa, thus licensing employees to provide certain types of investment services to clients – explains Nagy.

A Little ‘Fresh Blood’

Despite this, there is still very little ‘fresh blood’ entering the job market for brokers, and the financial industry, like most of the economy, has a problem with a shortage of workers in this segment. – The current situation in the job market for brokers and investment advisors is not particularly active. There is a shortage of qualified personnel, especially regarding experienced professionals who have a deeper understanding of the capital market. This is most evident in cases of job changes when companies often want to make the transition as painless as possible. The need for additional personnel can vary depending on the state of the capital market and the specific needs of investment firms. We notice that the lack of quality personnel is not only in the front part but also in back office operations, which are specific in the capital markets and require equally specific knowledge and responsibilities – emphasizes Nagy.

Accordingly, the departure of a broker or investment advisor with many years of experience is often an irreparable loss for brokerage. Today, broker salaries range between 1300 and 2000 euros, depending on experience and the brokerage house they work for. Working hours depend on the stock exchange where the investment firm provides trading services; if it is only the Zagreb Stock Exchange, the working hours are typically ‘nine to five’. If the brokerage also provides trading services on the US market, then they work late into the evening since trading on the New York Stock Exchange ends at 10 PM our time.

As for job tasks, they have changed significantly in the last 15 years. While in the early 2000s brokers primarily executed buy and sell orders on stock exchange terminals, technological advancements, especially in direct order execution, have fundamentally changed this job. – Today, brokers work more on data analysis, managing and supervising the trading process itself, and maintaining more intense contact with a smaller number of clients, while previously they spent more time in telephone contact with clients and manually processing orders – claims Nagy.

No More ‘Order Tickers’

The ‘brokerage industry’ in Croatia has consolidated over the years, and the way clients trade is changing, leading to a declining need for new brokers, emphasizes Danijel Delač, CEO of InterCapital Securities, the largest private brokerage in the country. – I would dare to say that I do not see a change in this trend in the coming years – says Delač. As he states, the development of trading applications is one of the reasons why a good part of the industry is stagnating. – Clients are increasingly trading through electronic platforms, and the job description of brokers is changing. Order execution is no longer the primary job, and in that sense, our brokers today are more relationship managers and experts for everything related to trading on the domestic, and especially foreign stock exchanges, rather than just ‘order tickers’ as this job was once derisively perceived – emphasizes Delač.

When asked if InterCapital can currently meet the needs for workers in this segment, Delač emphasizes that their team of brokers is experienced, cohesive, and all colleagues there have been working for at least several years, some for over ten years. – In the past, we had occasional departures from that department, which is normal and life, and we expanded the team by hiring colleagues who were beginners but had seniors beside them who could mentor them and introduce them to the job in a quality way. For some time now, we have not had a significant need to hire new brokers, but I believe we could still meet our needs in the same way – assesses Delač.

As he adds, they try to motivate and encourage staff for continuous professional development. – As an employer, we are demanding, but through monetary and non-monetary benefits, we strive to be desirable. The fact that we have a relatively low turnover of employees in this department confirms this – claims Delač.

The domestic capital market has begun to show signs of life – the CROBEX index recently touched 3000 points, the highest level since 2008. It could happen that this motivates more candidates to try their hand at brokerage. However, judging by the current labor situation, the long-awaited recovery of stock trading in the domestic financial industry could catch it on the ‘wrong foot’.