Going private for profit

The days of personal service are back for private clients, and the old ones are the best ones these days.
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The Independent Online
I f you come up against the hard laws of investment, should you consult a stockbroker?

If you come up against the hard laws of investment, should you consult a stockbroker? While the FT 100 Index was merrily climbing towards 7,000, it was so easy to trade on the internet or do self-selection through some other cheap scheme. The downturn poses hard questions.

Is there still time to cut losses? Which are the best defensive stocks? Are bonds safer than shares? When will the market bottom? And what about alternative investments?

During the bear market of the Seventies, such advice was readily available from family stockbroking firms with private client departments, but Big Bang saw most of these patrician names disappear into multinational financial groups. Then banks and building societies got into retail broking, and privatised utilities also had special offers for trading their own stocks. Ultimately, came do-it-yourself on screen.

Yet personal service is still available from old firms either fully independent or at least at arm's length from their parents, thanks partly to provincial networks. Their facilities includes the usual packaged investments, ranging from unit trusts and OEICs to Peps and Isas. Some offer self-invested personal pensions (SIPP) as well as execution-only services via telephone and internet.

But their key features are two dedicated alternatives for investing and managing lump-sums deposited by clients. Those who lack the time or knowhow will put the fund on a discretionary basis that allows the portfolio manager freedom of action and minimal reporting.

Active investors prefer the firm to work on an advisory basis, meaning that the portfolio manager awaits instructions to buy or sell. All the time, he can make recommendations (usually through periodic bulletins) and warn against a doubtful decision or poor performance. The firm of Henry Cooke Lumsden has been in Manchester since 1867, though it became part of Brown Shipley two years ago. Its marketing officer, Jim Akrill, says; "We prefer discretionary portfolios of at least £100,000, but are happy to advise clients with far less. Sound guidance is even more important during a falling market than a rising one."

Henry Cooke has 15,000 clients serviced by eight branches that favour Yorkshire, although it has long had a large office in the City. Charles Stanley of Sheffield, founded as a bank in 1792, largely covers the south coast and East Midlands with its 22 offices. There are 80,000 private clients, some of them from families who have been with Stanley for generations. Most deal on an advisory basis, but the firm also offers discretionary or execution-only services via phone or internet. For an advisory portfolio, £50,000 is preferred, double that for discretionary.

The marketing officer, Timothy Yeardley, says: "What matters is our assessment of circumstances and prospects. Referred individuals call us an undiscovered jewel, not just because of our first-class administration but because the past two years have put a premium on advice."

Also run from London and even older than Stanley is Brewin Dolphin with a similar number of clients. This largely staff-owned stockbroker is the largest home for private assets in the UK. It manages £17bn, a quarter of that discretionary. Its 34 branches include two in the Channel Islands. Bell Lawrie White provided seven Scottish ones in 1998, and last year Newcastle was added through Wise Speak, and an East Anglian presence through Hill Osborne. Its manager for new business, Stephen Hughes, says: "A stockbroker offers professional detachment instead of the greed and fear that rule day-trading."

That is why Redmayne Bentley of Leeds has coined the slogan: Your Friend on the Stockmarket. Established in 1875, it has 24 branches as far apart as Weymouth and Inverness with one planned for Belfast. Its minimum is £30,000 for advisory portfolios, and discretionary dealing for £50,000-plus.

As yet, only 4,000 of its 60,000 clients have opted for full service, but more and more they are being wooed away from execution-only. One manager with experience of the Seventies is Michael Wheeler. "We prefer to meet our clients and establish a close relationship, our first task being to tailor our service to their needs. We can build defensive, progressive, daring or blended portfolios".

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