Stockbrokers

A stockbroker is a middleman who buys and sells shares on behalf of his client. He earns his income by taking a commission for the transactions he carries out. These days share dealing is computerised - the broker will almost certainly sit in his or her office and monitor prices displayed on one of the data information services to which hell subscribe.

Stockbrokers come in all shapes and sizes some deal with private clients others are interested only in large institutions wholl make individual transactions for hundreds of thousands or millions of pounds.

The main services offered by stockbrokers are

Execution-only dealing This is the cheap and cheerful end of the stockbroking market. The investors knows what he wants to buy or sell and instructs a broker to carry out the transaction. The stockbroker is essentially doing no more than play the role of message boy- he gives no advice or guidance. The fees youll pay for this service ought to be modest. Some brokers will carry out buy and sell orders for you for 1 or less with a minimum commission of around £12.

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Advisory service - the stockbroker offers you a fuller service which will include advice on which shares to deal in. You may even receive investment research carried out by the analysts at the firm. The final decision however will be left with you on whether to buy or sell. Expect to pay more for this service perhaps between 1.5 -2.

Portfolio management Sometimes described as discretionary management. Here you hand over a chunk of cash £25000 is likely to be the absolute minimum but more likely £500000 or more and the stockbroker manages your affairs. Hell first want to ascertain what your investment objectives are so that he can take the right decisions on your behalf. If you go for this service expect to pay a additional fee for the management of your portfolio. This could be between 0.5 and 1 but you can negotiate especially if you have a large amount to invest.

If you deal frequently or hand the management of your portfolio over to a stockbroker youll almost certainly need a nominee account and you may need one anyway just to carry out execution-only transactions.

See Also Stockmarket Centre

2009-02-17 00:00:00 © Moneyextra.com