Financial planning: Don't neglect the most important aspect of your portfolio

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The Independent Online
With shares in around 1,800 companies quoted on the main stock market alone, it is no wonder many investors want an adviser to help them choose a portfolio. Trouble is, finding a stockbroker is often as time-consuming as selecting individual shares. But, David Prosser writes, it is worth making the effort.

Several hundred brokers offer investment advice in the UK. Unfortunately, there is no perfect route to finding the ideal one to meet your needs. Sometimes, it can be a matter of trial and error. Nevertheless, there are steps you can take to avoid ending up with an unsuitable adviser.

The first is to decide how much advice you need. For a basic service, you need an advisory stockbroker, who will expect you to approach him with ideas for deals. He or she will execute deals on your behalf but will also tell you whether he thinks potential trades are a good idea. Advisory brokers can also offer views on the general outlook for the stock market.

Some investors are happy with an advisory broker who divulges his opinions over the telephone. One firm, The Share Centre (01442 890800), even has a premium rate telephone service that you can call for advice on individual stocks. You then pay very low dealing charges. Other investors, however, prefer more of a personal service.

The next rung up the ladder in advice terms is to ask a portfolio manager to make your dealing decisions. Advisory portfolio managers won't deal without asking your opinion first while discretionary portfolio managers take your money and tell you every so often what stocks they have bought on your behalf and how they're doing.

The more advice you need, the more you will have to pay. Portfolio managers, for instance, levy a fee at least once a year. Advisory brokers take a commission each time you deal.

Clearly, charges matter. High fees will eat into your returns quickly. However, if you're looking for a stockbroker who offers advice, the quality of that advice is more important than the charges the broker levies.

Once you've selected the type of broker that you need, start looking for an individual firm. Apcims, the private client stockbrokers' association, is a handy starting point. It publishes a list of all its member brokers in the UK, with information on the services they offer. "This is a fairly comprehensive document," says Sarah McGuffick of Apcims. The guide, which is free, also gives a geographical breakdown of brokers in your area.

With the help of the association, you should be able to identify a number of potentially suitable local stockbrokers. A good way to narrow down the field further is to ask friends and relatives.

Then try to compile a shortlist of candidates, using the guide to check that they offer any specialist services you require. Do not feel you have to sign up with the first stockbroker you meet. It makes sense to visit four or five firms. The key is to find a broker with whom you feel comfortable.

When you visit brokers, ask about their experience with clients who have similar sums of money to invest as you. A broker should be able to give you an objective indication of how clients have fared with his advice.

It's also important to check on the resources that brokers have available. A very small firm won't necessarily fluff your investments, but a broker who has access to more research materials has an obvious head start. In addition, ask about the qualifications of anyone who will be advising you and the level of professional indemnity insurance they carry.

Finally, when you find a broker you like, make sure that he or she understands your aims very clearly. Your aims should be reflected in a client agreement letter.

It is possible that even if you're very careful about finding a broker you may end up dissatisfied. If this should happen, talk through your concerns with the broker and give the firm time to improve. Equally though, remember that you can change brokers whenever you like.

Apcims, 112 Middlesex Street, London EH1 7HY (0171-247 7080).