Author Topic: Mind engaging with a newbie broker?  (Read 12043 times)

IndustryGuy

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Mind engaging with a newbie broker?
« on: February 12, 2018, 10:06:14 am »
Hi,

I have recently started working at a brokerage firm. I won't name names because 1) I do not want this to be seen as a 'spammy advertising' ploy and 2) I do not have my boss's permission to be on here doing this ::) This is more for my own educational purposes than anything else. Nevertheless, I have actually been following this forum for many years now so I know this is a tight-knit community of hardcore investors. It thus makes perfect sense (to me at least) to engage with individuals like you as you are predominantly the kind of individuals we want as clients.

But I also know you are the hardest clients to get. From what I have read on these forums over the course of the last few years I have noticed that you are somewhat anti-brokers on here. You either manage your own portfolios or you invest in ETFs asking the question, why pay a broker 1% a year when you can get a basket of shares for 0.4% a year or lower with an ETF? Which is a valid question.

So here are some specific and some more general questions I have for you:

1. What services from a broker, for you personally, would validate a 1% a year managed portfolio fee over investing in something cheaper like an ETF?

2. If you do have a broker, what do you like/dislike about your interactions with them?

3. If you do have a broker but you manage your own portfolio, what brokerage services do you still make use of?

4. What services would you like to see offered by brokers which you are currently struggling to find?

5. Anything else I should know about?

Thanks. Hope I didn't step on any toes with this one. Have a nice day  :)

Patrick

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Re: Mind engaging with a newbie broker?
« Reply #1 on: February 12, 2018, 11:43:32 am »
Welcome, I think it's great having views from people on the other end of the chain. I'll start, but be warned there's not much I would hand over cash for!

1. What services from a broker, for you personally, would validate a 1% a year managed portfolio fee over investing in something cheaper like an ETF?
Free food for life. No I'm kidding, sorry there's just nothing I can imagine anything that would get me to hand over 1%, maybe some other people will differ.

2. If you do have a broker, what do you like/dislike about your interactions with them?
N/A

3. If you do have a broker but you manage your own portfolio, what brokerage services do you still make use of?
N/A

4. What services would you like to see offered by brokers which you are currently struggling to find?
Assistance with the setup of USD/EUR/GBP based bank and investment accounts.

5. Anything else I should know about?
I'm on the extreme end of the DIY investment scale. If I can avoid a fee I do my best to make it happen. At the moment my least favourite investment cost is the +-0.8% fee I need to pay to move cash to the USA.
« Last Edit: February 12, 2018, 11:46:00 am by Patrick »

Moneypenny

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Re: Mind engaging with a newbie broker?
« Reply #2 on: February 12, 2018, 11:49:48 am »
Hallo IndustryGuy

You’re not going to like this.   :D

Apologies, this is one genie I can’t put back in the bottle but hopefully my cynic views will at least help you with your educational expedition to better understand other potential skeptic clients.

My reasons for not wanting a broker

I think they won’t be so committed/dedicated to my portfolio as I am. (Everyday)

I’m one of their many clients, not numero uno as I’m with my own.

Technology made it super easy to do it yourself, anywhere, anytime.

Trust.  Sorry, I just don’t trust them to be ethical people/institutions, no it’s not just the Bernie Madoff’s or Jordan Belfort’s of this world who did this, I’ve experienced it myself.  (I know not all are rotten, but the mirror is cracked now, no amount of polishing will fix it)

For 1% I would want a guarantee (yes I know, not possible but you’ve asked) that the institution will have better returns than myself or a specific percentage, If they don’t make it – institution should fill the gap.

Yes, still also have broker from way-back-when (before internet).  No interaction except for statement every 4 months of fund movements. Just leaving it as is, as a backup if you will and tax implications.

I like to do it myself.


If I were you, I would concentrate on people who just started to work who don’t have time to learn investing/trading – hammer them with compound interest/dividends, new parents and parents of kids 6-12 jr – link investment to kid's education/future and people who are about to retire/opted for retrenchment who have no interest in doing it themselves.

On the positive side, I’m really jealous of you, just started working at a brokerage firm – would have loved to do that.  I hope you realize you are in the belly of the beast, learn all you can and use it for your own investments/trading one day.   {Edit:  Oh ja, and don't forget to share some inside industry secrets with us. ;)}

Good Luck. :TU:
« Last Edit: February 12, 2018, 11:54:14 am by Moneypenny »

jaDEB

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Re: Mind engaging with a newbie broker?
« Reply #3 on: February 12, 2018, 12:52:50 pm »

1. What services from a broker, for you personally, would validate a 1% a year managed portfolio fee over investing in something cheaper like an ETF?

No Idea.


2. If you do have a broker, what do you like/dislike about your interactions with them?

I have a Broker, have good relation with him. I make my own decisions, I phone and indicate buy / Sell. He is however my firewall, he advises me from buying to much risky shares i.e. African bank. He does however allow me to buy a small % of my portfolio on risky stuff. I have met him once, at Rage (Gaming Expo), for coffee. He also taught and helped me to buy Tesla / Tencent offshore.

3. If you do have a broker but you manage your own portfolio, what brokerage services do you still make use of?

Advice - I can phone and ask what do they think of a particular share. I think they can offer more online stuff. i.e. better graphs and so on.


4. What services would you like to see offered by brokers which you are currently struggling to find?

Hugs and a Red bull when your shares fall more that 10% on a particular week . . .

5. Anything else I should know about?

Yes, stop crying about NPN being such a big % of the JSE and crap on the other companies for not being so big. If I hear another Broker saying NPN is too large I will throw my piece of Bitcoin at him. And another broker comment, BTC is a fraud and will crash, I do not know anything about it, I need to read about it this weekend.  :wtf:

jaDEB

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Orca

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Re: Mind engaging with a newbie broker?
« Reply #4 on: February 12, 2018, 02:43:03 pm »
Chances are that your managed portfolios have NPN in them. NPN is too big so I do my own investing.
I started here with nothing and still have most of it left.

IndustryGuy

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Re: Mind engaging with a newbie broker?
« Reply #5 on: February 12, 2018, 03:21:09 pm »
Thanks for the replies so far.

Welcome, I think it's great having views from people on the other end of the chain. I'll start, but be warned there's not much I would hand over cash for!

4. What services would you like to see offered by brokers which you are currently struggling to find?
Assistance with the setup of USD/EUR/GBP based bank and investment accounts.

5. Anything else I should know about?
I'm on the extreme end of the DIY investment scale. If I can avoid a fee I do my best to make it happen. At the moment my least favourite investment cost is the +-0.8% fee I need to pay to move cash to the USA.

Thank you for the welcome. Really.

We might actually be able to help you with number 4. We assist many clients in setting up a CCM account through Investec for FX accounts. Not sure if that is what you meant with bank account? As for offshore investment accounts, we can easily set up a SaxoTrader account for investing. Sorry, had to put that little plug in for you.

As for number 5, tried to see if I could swing something for you here on this side but apparently our 10 cent spread comes in at 0.2% above the 0.8% fee that pains you so much. I tried.

Hallo IndustryGuy

You’re not going to like this.   :D

...

If I were you, I would concentrate on people who just started to work who don’t have time to learn investing/trading – hammer them with compound interest/dividends, new parents and parents of kids 6-12 jr – link investment to kid's education/future and people who are about to retire/opted for retrenchment who have no interest in doing it themselves.

On the positive side, I’m really jealous of you, just started working at a brokerage firm – would have loved to do that.  I hope you realize you are in the belly of the beast, learn all you can and use it for your own investments/trading one day.   {Edit:  Oh ja, and don't forget to share some inside industry secrets with us. ;)}

Good Luck. :TU:



No hurt feelings here ;) Like I said, followed this forum for many years now so I expected to hear it. But still nice tips on who to target if you were me. Also always thought I would to be a broker and now that I am one it is super stressful working with other people's money. But that is a good thing. Hope I don't get used to it and start getting lax. That is when I am going to start making mistakes. Biggest reason I joined them was exactly because I wanted to learn from the inside and I have to say, have already learned a ton in the little time I have been here.

Are you sure you want me to share those inside secrets? Once you know what your soul is worth you can never unlearn it :D



4. What services would you like to see offered by brokers which you are currently struggling to find?

Hugs and a Red bull when your shares fall more that 10% on a particular week . . .

5. Anything else I should know about?

Yes, stop crying about NPN being such a big % of the JSE and crap on the other companies for not being so big. If I hear another Broker saying NPN is too large I will throw my piece of Bitcoin at him. And another broker comment, BTC is a fraud and will crash, I do not know anything about it, I need to read about it this weekend.  :wtf:


Considering that I am a junior broker, I would be probably be the reason you got into stocks that fell 10%. I guess giving you a Red Bull and a hug is the least I could do for you. In my honest opinion, I don't think NPN is big enough considering the huge gap between NPN market cap and the worth of their 33% stake in Tencent. That was of course until I found out that NPN does not have any contractual rights to the assets of Tencent. Now I don't know if NPN is too small or too big.

Chances are that your managed portfolios have NPN in them. NPN is too big so I do my own investing.

You should talk to jaDEB. But actually most of our managed accounts are bespoke so the client actually gets to have a say as to what they want and do not want in their portfolio and we take it from there.

Moneypenny

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Re: Mind engaging with a newbie broker?
« Reply #6 on: February 12, 2018, 04:13:04 pm »
Only one thing left to do now. 

Get your @$$ on the Investor Challenge - change your name if you like, just PM me the new name. :D

gcr

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Re: Mind engaging with a newbie broker?
« Reply #7 on: February 12, 2018, 09:00:56 pm »
I'm a little confused - some have commented that they don't need a broker to manage their portfolio, whilst others question the costs around providing this service.
To my knowledge nobody can place and order to sell/or buy without being a customer of a broker company. There are a defined number of broker companies and the licenses are reviewed periodically.
So to say that you don't need a broker to manage your portfolio is merely a service offered by a broker company and has nothing to do with their platform allowing you access either directly or by agreed communication methods i.e. fax, e-mail, identified phone call
So in my mind what IndustryGuy is trying to deduce is whether there is a service need from the forumites for broker services

In answer to some of his questions for those who know very little about our market operations then maybe 1% is not too horrible if they deal with you as an individual and review your portfolio frequently (at least daily) give you pointers as to market trends, outside influencers, what's happening in foreign markets and other input which you can use to upskill your own knowledge. However for those that want to boost there wealth this becomes an interim measure until you feel confidant to go it alone. You can then cut the umbilical cord and place orders to buy and sell over their platform provided costs are not unrealistic. Also as your portfolio value grows you can always negotiate better rates on broker services and the cost of holding your portfolio   
Not everything that counts, can be counted, and, not everything that can be counted counts - Albert Einstein

Maurice

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Re: Mind engaging with a newbie broker?
« Reply #8 on: February 13, 2018, 07:24:46 pm »
Hi new broker,
My two Rands worth:

Taking Steinhof as an example was this a recommended share by you or your brokerage.
What strategy would you recommend to beat the Top40/ALSI over 5 years.
What companies are overvalued?
What companies are undervalued?
Do you think ETFs are the answer considering the cost charged for running a fund?
Do you think mining/resources stocks are a good fit for an individual long term portfolio?

I hope the list works

IndustryGuy

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Re: Mind engaging with a newbie broker?
« Reply #9 on: February 15, 2018, 11:17:10 am »
Hi new broker,
My two Rands worth:

Taking Steinhof as an example was this a recommended share by you or your brokerage.
What strategy would you recommend to beat the Top40/ALSI over 5 years.
What companies are overvalued?
What companies are undervalued?
Do you think ETFs are the answer considering the cost charged for running a fund?
Do you think mining/resources stocks are a good fit for an individual long term portfolio?

I hope the list works

Taking Steinhoff as an example, was this a recommended share by you or your brokerage?

I have never personally recommended Steinhoff, no. But I can tell you that if I had, I would have changed my mind very quickly once reports started surfacing of investigations by the authorities in Germany. Nevertheless, when we recommend stocks, we never do so based solely on personal opinion. We have access to an array of sell-side reports from a multitude of institutions such Investec, PSG, Deutsche Bank, etc who all viewed Steinhoff as a buy. We only form opinions and recommendations after going through those reports which we happily share with clients for their own input. But yes, there were people at the firm who recommended Steinhoff as it was recommended by institutions with research departments bigger than our entire firm. We own up to that mistake, but we cannot be faulted too much when even institutions 100 times our size missed it. Not an excuse. Just saying.

What strategy would you recommend to beat the Top40/ALSI over 5 years?

It is extremely difficult to beat the Top40/ALSI and we will never claim that we are able to do it. We do not play the creating alpha game. With that said, though, considering how heavily weighted the Top40 is on Naspers, you would have a better chance of beating an equally weighted Top40 index. But even then it would involve a high-risk strategy where a large part of your portfolio would have to be in extremely volatile stocks like small caps. In all honesty, we just focus on a GARP strategy which is growth at reasonable prices. To put it in simple terms, just buy good companies with good growth prospects at reasonable prices.

What companies are overvalued/undervalued?

I hope you do not mind me bundling those to questions into one, but we run a bunch of screeners to find stocks based on a multitude of fundamental metrics. I guess I can sit here all day going through a multitude of stocks considered to be over or undervalued but let’s rather do 2 examples. If you have read the latest Investec report on Naspers, you might start to wonder if that is not an overvalued stock which is something that really needs to be taken a look at. On the flip side, with good fundamentals, a really beaten up stock like Lewis is seeming undervalued. At the end of the day, though, it is not always that simple. Stocks are affected by outside factors all the time such as politics and even the weather. They can go from overvalued to appropriately valued to undervalued very quickly.

Do you think ETFs are the answer considering the cost charged for running a fund?

Not such a clear cut answer. Fund fees are related to performance. If they beat the market, then yes, the fees are worth it. If they don’t, then it is not. So I guess that is what the question should focus on: Managed fund performance vs ETF performance. In this case I guess it is still not looking good for actively managed funds because 8 out of 10 fund managers do not beat the market. But on the other hand, after subtracting ETF fees, they NEVER beat the market. So now you see how it is difficult to answer that question? But we are not anti-ETF. Not the least bit. Just as we use the GARP strategy, we also use the core and explore strategy. Basically it means finding an ETF or 2 as the core of your portfolio and then exploring individual stocks to compliment your core. It is all dependent on your age and risk profile, of course. The older you become the more we would prefer you moving out of stocks and ETFs and more into bonds and the like.

Do you think mining/resources stocks are a good fit for an individual long term portfolio?

If you think Steinhoff was difficult to predict, resource stocks are a 100 times worse. You can find a great resource company, but if the underlying resource price takes a huge hit, it will take the whole company down with it. Take for instance Sasol. It was a great company but then OPEC decided to meet the frackers in America head on and flood the market with oil. Oil prices dropped to ridiculously low prices and Sasol suffered heavily through no fault of their own. But again, it is all dependant on your risk profile. Some resource stocks are fine for a 20-year-old but horrible for someone going on 70.

Maurice

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Re: Mind engaging with a newbie broker?
« Reply #10 on: February 15, 2018, 01:31:43 pm »
Thanks for the reply.
Steinhoff a lot of people got wrong. But read this article https://www.moneyweb.co.za/investing/psg-why-we-didnt-own-steinhoff/ and PSG who had ties with Steinhoff avoided them! How could they read the signs?
What worries me about not being able to beat the Top40/ALSI is if this is true we may as well just buy the ETFs and forget about trying to manage a portfolio. Especially if you can identify the "Dogs" and not have them in your portfolio wouldn't that enable you to beat the market? That was the reason for the Steinhoff question.
For resources the view should be only if you actively manage your portfolio and can get in and out at the right time should they be considered.
Hopefully we can discuss this more. :TU:

gcr

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Re: Mind engaging with a newbie broker?
« Reply #11 on: February 16, 2018, 07:48:01 pm »
Industry Guy - a question - in one of your paragraphs under the heading "do you think ETF are the answer" you advocate for older people the movement away from these instruments into "bonds and the like". My question is why would you advocate moving to bonds and presumably cash also falls into this category for people around 70 and older. It seems that financial planners also suffer under this apprehension. Surely the most appropriate approach would be to understand the clients income streams and then determine needs over x years of a normal lifespan. Once that is determined then a savvy advisor would then get a picture of income and needs and expenditure and create a model for the client. Have you ever done an example of this type of advise to a 70 year old person and then determined the difference in income by remaining in shares and or even ETF versus switching to "bonds and the like".
I always work on the principle "would this be what I would advise my own father to do if I was managing his investment portfolio". Another consideration is even if you client whom you advised to switch to bonds and the like still has a spouse how is she going to survive once the husband has departed as she undoubtedly will get 50% or less of the customers pension and will have to transfer the bonds and the like into her name and probably have to incur costs for this transfer (ETF would also incur costs).
Be interested to hear your views
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IndustryGuy

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Re: Mind engaging with a newbie broker?
« Reply #12 on: February 22, 2018, 02:22:23 pm »
Industry Guy - a question - in one of your paragraphs under the heading "do you think ETF are the answer" you advocate for older people the movement away from these instruments into "bonds and the like". My question is why would you advocate moving to bonds and presumably cash also falls into this category for people around 70 and older. It seems that financial planners also suffer under this apprehension. Surely the most appropriate approach would be to understand the clients income streams and then determine needs over x years of a normal lifespan. Once that is determined then a savvy advisor would then get a picture of income and needs and expenditure and create a model for the client. Have you ever done an example of this type of advise to a 70 year old person and then determined the difference in income by remaining in shares and or even ETF versus switching to "bonds and the like".
I always work on the principle "would this be what I would advise my own father to do if I was managing his investment portfolio". Another consideration is even if you client whom you advised to switch to bonds and the like still has a spouse how is she going to survive once the husband has departed as she undoubtedly will get 50% or less of the customers pension and will have to transfer the bonds and the like into her name and probably have to incur costs for this transfer (ETF would also incur costs).
Be interested to hear your views

Hi gcr,

As mentioned, I have only recently started working in the brokerage sector so I am very much still in training. So no I have not given advice to someone over the age of 70, or younger to be honest, concerning investments. That's left to those who are a bit more experienced. All those answers I shared beforehand came from such individuals and I just quoted them, and not always well. But I can definitely pose your questions to them and see what they say.

But in my ETF answer I did say it depends on your 'age and risk profile.' Thus it is not a one-size-fits-all solution. Everyone is taken on a case-by-case basis and what we recommend for one we will not necessarily recommend for another. I guess the only reason we would like to see less exposure to ETFs at a more advanced age is because at the end of the day stocks are volatile. You do not want to be overly exposed to possible Steinhoffs at an age where you have less and less time to recover losses.

Bevan

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Re: Mind engaging with a newbie broker?
« Reply #13 on: April 01, 2018, 10:34:39 pm »
I'm also interested in this whole brokerage thing... Having been a professional commodities trader and now a homesteader in Hogsback, I'm kinda more interested in harvesting my porcini mushrooms, teaching people about sustainability, and making other cool foods. However, trading and writing helps pay the bills, especially as one of the SA stockbrokers wants me to do research for them, as well as new product development.

So to expand on the original question, some more thoughts...
- what do you think of this whole copy trader malarky? What % fee would you part with to execute the same trades as a supposed pro?
- what new products / services should brokers be making available? Other than the whole crystal ball thing, which would of course be really cool.
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rjthomas

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Why Engaging with a Newbie Broker?
« Reply #14 on: April 10, 2018, 09:06:05 pm »
Here's my advice to you: Do your own investments, and share your experiences on a blog or even better, your LinkedIn profile. This way, I know you follow your own advice. Blogging can build your credibility and allow people looking for a broker to find you. It will take time but it pays off over the long term.

The #1 reason I don't like brokers is that they are salesmen who recommend products with the highest commission, not what is in my best interest. Listen to Tom Leykis show's Money Monday segment.

Good luck,
Ramon
South African working in China since 2012