A gentle guiding hand

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The Independent Online
TO FIND the right stockbroker is not an easy task for investors with small portfolios. Many brokers prefer to concentrate their efforts on the institutions and do not want the administrative hassle of dealing with small accounts.

The Association of Private Client Investment Managers and Stockbrokers (20 Dysart Street, London EC2A 2BX) will supply a free brochure giving details of brokers that are interested in small private clients and describing the kind of services they offer.

For active investors there are two main alternatives: execution-only or a more comprehensive service that might be called 'hand-holding'. I hasten to say that I like my hand held and by this term I mean receiving investment recommendations, immediate advice about directors' dealings and major news developments, copies of press cuttings and brokers' circulars, the occasional share placing, market updates and a friendly word. The more active your account the more help you can look for from your broker and the more friendly the word.

A further problem for medium-sized private clients is the level of commission charged by traditional stockbrokers. This can range from about 1.65 per cent down to 0.5 per cent and even lower for really major clients. There are also often hefty minimum charges, usually of about pounds 25 a transaction, which can be particularly onerous for very small bargains.

I have never grudged commission paid to an efficient stockbroker. I do not like to pay over the odds, but provided I get good service, I prefer not to be cheese-paring.

In the past, I have always thought that execution-only stockbroking was a false economy, but while researching a new book, I visited Sharelink in Birmingham. It seems to offer an attractive halfway house.

Sharelink's minimum charge is pounds 20 for each individual share up to pounds 1,333, 1.5 per cent for orders of pounds 1,333 to pounds 2,500, 0.75 per cent on the next pounds 2,500, and only 0.1 per cent on the extra over pounds 5,000. On a pounds 10,000 order, its charge would add up to pounds 61.25p (0.61 per cent), but on a pounds 20,000 order this would drop to only 0.33 per cent. This is cheap, even by the standards of execution-only brokers, and very cheap indeed when compared with more traditional brokers offering a fuller service.

However, the main revelation from my visit was the discovery of Sharelink's new service called Sharefinder, which covers the leading 650 companies and has three essential features: a weekly performance summary, a weekly buy/sell guide and individual company reports.

The weekly performance summary costs pounds 2.95 a copy and gives details of price/earnings ratios, net asset values, yields, gearing and relative performance. The buy/sell guides cost pounds 4.95 each and give details of brokers' consensus recommendations for the same 650 shares.

These statistics are useful now and then, but the best value for money is Sharelink's company report for pounds 4.95. Each report is produced to order, so you can always be sure of the latest information. There are details of how many brokers have recommended the share as a buy, a sell or a hold. There is also a computerised consensus commentary, which I tested against three shares I know well, and found to be remarkably good in picking up the salient points.

In addition, the report includes five-year statistics of earnings, dividends, price/earnings ratios and key financials, together with shareholdings, charts and all the latest anouncements. Excellent value for pounds 4.95 for someone contemplating investing in a leading company.

Sharelink is also thinking of introducing weekly Datastream-type searches for shares that comply with differing selected criteria such as high yield, net asset value over book value and above-average earnings growth in relation to price/earnings ratios. Sharelink makes it clear that it is not in the business of offering investment advice, but the information it now provides adds a new dimension to its services and makes it a very attractive halfway house for small investors who do not need their hands held too firmly.

The author is an active investor who may hold any shares he recommends in this column. Shares can go down as well as up. Mr Slater has agreed not to deal in a share within six weeks before and after any mention in this column.

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