Full Service Brokers…and why you would use oneI received an email from a Marcus Today Member. It said: MEMBER EMAIL: “I am exhausted trying to do my own investment. I’m not sure I enjoy it any more. I keep getting blown up. And as if the results season wasn’t bad enough, then all my technology stocks stabbed me in the back. I have thought about using a full-service broker. Is that a good idea? Or are they all shonks and charlatans?” REPLY: Doing things on your own is possible in many instances. Gardening, carpentry, painting & decorating, and, with the advent of the internet, accounting, legal work and even these days, medical diagnosis. But these professions take time and energy and will not get done unless there is a drive, and for shares, a passion. Many people don’t want to come home of a night and do another job as a pretend fund manager, it is a burden, and, in a relationship, can even be divisive when there are dependents relying on the financial acumen of a well-intentioned but amateur investor. So some people look for professional help. Not because it is something they can’t do, anyone can buy shares, but because it is something they don’t want to have to do. Stock brokers, like estate agents, have been scorned for decades. It started after the tech boom in 2000, an event that exposed the ignorance and exploitability of the private investor. A moment of irrational exuberance that had to be blamed on someone and the broking industry copped it bad. The private investor had to be protected from themselves and since that time, over two decades, the full-service stock broking profession has been persecuted and regulated and at the same time, mercilessly undercut by technology. Twenty years later and it has changed. Maybe you haven’t noticed. Maybe you are still suspicious. Maybe you think being online, doing it yourself, ‘doing your best’ from your kitchen in Whoop Whoop is the only option left. Heads up, its not. The stock broking industry has changed. Gone are the corner cutters, those who weren’t prepared to bend to regulation, gone are the cats trying to get out of the compliance bag, gone are the colourful characters that did their best work after lunch (small sigh) and gone are the passengers that didn’t make a profit for themselves or their clients. The truth is that in 2020, any stock broker left standing is a veteran, a survivor, experienced, licensed, compliant and professional and they offer access to sophisticated products, IPOs, new issues, corporate deals, research, international investments, stock advice, financial advice and experience, with errorless execution, and a little known or recognised benefit, excellent administration. A lot more value than a business that charges $19.99 a trade and gets paralysed at crucial moments without a human in sight. Believe it or not, you’d be lucky to have a stock broker pay you some attention these days because these days they are more concerned about whether you impress them than whether they impress you. With that in mind here are a few tips on how to find and maintain a full-service broker in 2020.
- To get attention you need to be rich. Don’t look for a full-service broker if you are going to trade with $50,000. It is (should be) of little interest to them. Smaller clients should be online.
- How much is enough? Some brokers in the past have done a cost/benefit analysis on their client bases and ended up booting anyone with less than $500,000 on a HIN. It’s probably $1m by now. If they do take you on with little money, you are probably dealing with someone very young or inexperienced, although young brokers if you get one, often pay you a lot more attention but provide access to the same advice.
- Toe the line. In the current compliance environment clients are as much a liability to brokers as an asset. Be compliant. Don’t complain about the paperwork, don’t cut corners, don’t hide any details, and don’t do anything stupid like offer to pay in cash or drop off a cheque at reception. They’ve seen it all and they will sniff you out.
- A partnership not a hierarchy. Work together. Brokers will not and can not, take any discretion over your money. You do not ‘hand over’ to a broker. You work with a broker. You are partners in a quest to make money. There is no room for either of you to play Lord Farquaad.
- It is your responsibility to show interest. Yes, at the beginning, to get you signed on there will be an assessment, some advice, some changes made, some interest and activity. But after that, if you want action you need to provoke it, otherwise your, emphasis on your, investments will wither on the vine once the initial investment and effort has been made. I suggest you make a call a week just to keep things rolling and keep yourself in mind (some financial advisers are going to hate me for suggesting that).
- The onus is on you to develop a good relationship. Its not hard. Brokers love the stock market, all you have to do is be interested and, if possible, be pleasant, undemanding, respectful and intelligent to deal with. It’s the first law of making conversation. Talk about something they want to talk about. Easy. The stock market.
- Make friends. In my time in broking I made some great friends amongst my clients. What better job in the world than turning up every day trying to make you and your friends money. Its common sense. Be nice. Offer to buy them lunch. Cultivate them. See the relationship as long term. Or be a demanding pain. Your choice.