From expertise to execution, find the right broker

Do you want a firm to take control or just someone to carry out your decisions? Simon Read explains the different services on offer

The Popular view of a stockbroker is someone who earns big money, wears striped shirts and yells "buy" and "sell" down the telephone before heading off to the golf course or the nearest glitzy wine bar with a bunch of get-rich-quick clients.

The reality is rather different. Life in the dealing rooms may have an air of excitement but for the most part it's like almost any other office - and managing other people's money is a serious business.

After more than a decade of privatisations, PEPs and personal pension plans, many of us now own shares. Many small investors make their own decisions, using a stockbroker simply to carry out the transaction. This is known as an execution-only service. The high-street players - the banks and building societies - and the telephone brokers have moved into this area with aggressive pricing and marketing, which means that you can now buy or sell shares at a cost of little more than pounds 10.

These services are primarily aimed at people with privatisation shares to sell, those who want to buy into popular new share issues or those who manage their own portfolios. The broker does not offer any advice.

For advice or skilled portfolio management most people will turn to the traditional stockbroking firms. The good stockbroker will ask a number of questions - a process known as fact-finding. The firm will want to understand your individual circumstances and your specific requirements.

If you have ethical considerations, good brokers will also take them into account - but it's worth discussing this early on to ensure that your broker is sympathetic to your needs.

Many traditional stockbrokers do operate an execution-only service but their mainstream business is in advisory and discretionary portfolio management.

An advisory service will give you a degree of portfolio management but still leave you to make decisions, based on the professional advice you receive.

If you are not interested in where or how your funds are invested - but simply want to collect the profits - you should opt for full-service discretionary portfolio management. This requires a degree of trust on your part - so you should be completely confident that you and your broker understand your investment objectives.

A discretionary service allows a broker to act quickly on your behalf, which is especially important in times of rapidly moving markets. But using a discretionary service should not mean that you lose touch with your investments - brokers will normally send you a contract note for each deal and will provide portfolio valuations and reviews at agreed intervals.

This kind of service has its price and you can pay by commission or fees or a mixture of both. If you pay by commission it means you'll be charged each time you deal, while a fee is generally annual or half-yearly. The minimum commission is generally pounds 20 to pounds 25 per transaction while annual fees will be around 1 per cent of the total portfolio under management. You pay these whatever the outcome.

But choosing a stockbroker to run a discretionary portfolio for you shouldn't be done on price. Find out as much as you can about the firm to get an idea of whether it will suit you. Check what returns the broker has achieved for clients in recent years. Ask what is the average size portfolio it manages; if it's roughly the same as yours then you could be in the right place. Take time to talk about investment strategy - if you can understand why the firm makes certain decisions on your behalf, it will give you more confidence in its ability to meet your needs.

It's also worth asking what else your stockbroker can do for you. These days many will be able to advise you on the whole range of personal finance.

If you have any problems with a stockbroker you can complain to the regulators : the Securities and Futures Authority (SFA) or the Investment Managers' Regulatory Organisation (Imro). Members of both organisations are covered by the Investors' Compensation Scheme.

q For a directory of firms that look after individual investors contact the Association of Private Client Investment Managers and Stockbrokers, 112 Middlesex Street, London E1 7HY.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
PROMOTED VIDEO
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little