Wednesday, 13 March 2013

Investing in shares – guide to full service v. online brokers

To purchase shares on the Australian sharemarket, you need to enlist the services of a broker.  Basically, the broker acts as your agent in the market – you instruct him/her to acquire shares on your behalf at a certain price, and he/she places the order in the Australian Stock Exchange’s (ASX) automated system that matches buy and sell offers in real time.  To sell shares, you do the reverse.

There are around 80 broking firms authorised to trade on ASX.  They can be categorized into two main types:
  • Full-service brokers
  • Discount/online brokers
I’ll discuss the strengths and weakness of each of these below, plus list some key questions to ask during your selection process.

Full-service brokers

Full-service brokers provide an end-to-end service, including advice on buying and selling shares, investment recommendations, and research. They generally also offer advice on other investments and tailored investment planning and wealth management.

Examples include:
  • Macquarie Equities
  • Morgan Stanley Wealth Management
  • Ord Minnett
  • Paterson Securities
  • RBS Morgans
  • Shaw Stockbroking
  • UBS Wealth Management
Advantages of using a full-service broker include:
  • You can receive personalised advice on Australian and international companies and markets, plus a full suite of research targeted to your needs.  Your broker will likely have faster access to company news and announcements than you.