In our digitally interconnected world where unlimited information is available with the click of a mouse button, is there still a place for the traditional stockbroker?
Millions of Australians have turned to online broking platforms since their introduction in the late 1990s, which might suggest personal broking services are obsolete.
After all, it’s never been easier or faster to place an online trade. And unlike the relatively high fees charged by the brokers who provide personal advice, it’s possible to transact online at virtually no cost.
Statistics show that most online broking accounts are created when markets are booming. When the boom times end, profits often turn to panic for the day traders and speculators. It can be an expensive reminder that there’s no such thing as easy money.
But old-school brokers still have one big advantage over the DIY option – and that’s access to knowledge. Research is a key part of deciding which stocks to invest in, and the better stockbrokers have in-house analysts.
Good analysts will not only understand the financials of a company but the resources to meet with company executives and industry leaders on a regular basis. That can help build a comprehensive knowledge bank of the business and the people involved.
Few individuals have the time, or capability to research a stock that extensively.
That doesn’t mean a stockbroker can guarantee better investment results, and it’s worth pointing out nobody can predict the future, even a financial specialist with decades of experience.
But for a beginner investor, or someone who isn’t confident in making important investment decisions, seeking advice from a stockbroker could be safer than randomly picking stocks, or getting tips from an internet chat group.
Yes, the services of a stockbroker will cost you. Typically, there will be a brokerage charge (which may be a fixed dollar amount or a percentage of the trade value). Brokers who provide broader personal advice may also charge a fee to prepare a Statement of Advice, as well as ongoing fees to manage your portfolio.
Those personal services could prove invaluable to many investors. Of course, others will be happy making their own investment decisions. For them, there is no shortage of online broking services offering no advice, but very low transaction costs.
This article contains factual information only and is not intended to be general or personal financial advice, and is for educational purposes only.
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