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Must-have: the right stockbroker

May 05 2010 11:21

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When an investor wants to buy or sell shares, it must be done through a JSE-registered stockbroker.

Full service vs discount

There are a number of stockbrokers, with the main distinction between what’s called full service stockbrokers and discount stockbrokers.

In other words, a person who can speak to the investor and provide advice and help to access a range of other services and information, or an online facility where the investor executes the order without help from an adviser.

Many financial services and investment groups run both services.

However, price as well as the advice and information available to investors differ widely.

Typically, brokerage costs range from less than 0.4% of the value of the buy or sell transaction to around 1.7%.

Some brokers work off a flat fee and others on a sliding scale, depending on the amount being invested.

However, if the investor wants to spend a large amount of money – say, R1m upwards – brokerage fees are always negotiable.

Online brokerage Sanlam iTrade offers pretty much the Full Monty.

Clients can access live share prices, alerts, watch lists, non-cash practice simulation and technical and fundamental research from the investment research team at Sanlam Private Investments.

Convenient platform

But iTrade head Gerhard Lampen says instant, real-time access to announcements and company information on the Stock Exchange News Service (Sens) offers his clients a competitive trading advantage.

“Clients who want to execute short-term trades get the Sens information as soon as it’s released to the market," he said.

"What typically happens is Sens information is released, then picked up by Reuters, then by the stockbroker and finally by the client, who’ll get a phone call if it’s a large client or an email."

"By that time iTrade clients who want to have already acted on the information."

The large retail banks also offer online trading to clients. It’s a convenient platform for an account holder with the bank but often the services are fairly basic.

Standard Bank, operated by Standard Financial Markets, is rated the best.

“Due to improved market conditions and large volumes traded on the JSE, most brokers haven’t increased their brokerage fees over the past year," said Tshwantsho Matsensa, head of Standard On-line Share Trading.

"As the exchange grows, so the cost of buying and selling shares continues to come down as the fixed costs of brokers and the exchange are spread out over more transactions."

He added that for equity transactions above R10 000, costs at an online broker are typically less than 2% - relatively cheap compared to unit trusts, property and many other investment alternatives.

Using Standard Online fees as an example, the dealing costs on a buy transaction of R10 000 will be 0.94% (or R94.47) and on a sell trade 0.69%.

The difference is due to securities transfer tax of 0.25% of the value of a buy transaction.

Find your price

Absa Stockbrokers, which also runs an online and a conventional broking service, has held its brokerage fees level for a long time, said compliance officer Louis Rittoff.

“We only have two brokerage rates: 0.4% of R120 for online deals and 1% of R100 for phone execution orders.”

That would make Absa Stockbrokers one of the more competitively priced broking firms.

However, investors must ultimately decide what they need and how much they’re willing to pay for the service.

Confident investors with some knowledge of equities may be quite happy with one of the cheaper, no-frills online brokerages.

Those seeking investment advice – and someone to give it to them – will feel better with a full service stockbroker, despite the higher costs.


 - Finweek
 

sanlam  |  absa  |  standard bank  |  invest  |  equities
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