7 Key Things the Stockbroker Can do for You
An Acceler8now.com Investing Education Resource July, 2007
If you are serious about investing in the stock market, you can be sure that sometime soon, you're going to need a stockbroker. In fact, unless you restrict yourself to primary offers and never bother selling any stock, it won't be long before you'll have to use a stockbroker. A broker, in any situation, is a middleman, helping parties get transactions executed. That is also true in the stock market, where the stockbrokers get intending buyers and sellers of stocks to transact their business. Interestingly, the buying and selling shareholders do not need to meet or know each other. The stockbrokers see to the execution of the transactions.
Stockbrokers in Nigeria are licensed for their important role by the Securities and Exchange Commission (SEC), which also regulates their operation. They are expected to operate within the ambit of the market procedures and rules, provided in the relevant laws and regulations. In this context, infringement of rules of the market, including abuses of customers' accounts or transactions, are often appropriately sanctioned.
Only the licensed stockbrokers are permitted to trade on the floor of the Nigerian Stock Exchange. That leaves the rest of the us - the investing public - no choice but to buy and sell shares through stockbrokers. Given that scenario, it is one of the initial steps you will have to take when you want to begin to invest in the stock market. You have to find a stockbroker or more than one, that you transaction your purchases and sales of shares withs. To chooase a stockbroker, you must exercise care. That's because issues can arise as to quality of service, speed of delivery or even honesty of the stockbroker. For what to look for when selecting a stockbroker, read this article.
You are looking for a stockbroker that can meet your expectations and facilitate your investment objectives, not one that will become a clog in your wheel of progress. What can you expect the broker to do for you? It could be some or all some of the following, depending on what you require:
- Take and Execute Your Orders
Your transaction orders will be either to buy or to sell stocks or other securities. This is the most critical reason you need a broker, given that your transactions have to be executed by one. Placing an order with a stockbroker is a painless process, the most difficult part being to provide the funding for your purchase, if a buy order. There are no complicated forms to complete - a share transfer form, required whether buying or selling, is an easy-to-complete document and the broker will guide you where you need help. The stockbroker has SEC-approved fees for this service and will not be expected to charge more. On the contrary, if you have the purchasing power (significant volume, to be precise) you can negotiate for a reduction. Rates have continued to get slashed, so always be sure you know the current rates.
While executing your orders may seem straightforward, many stockbrokers fail to deliver that service with any clinical finish. Be on the watchout for delays and bottlenecks that are only meant to take advantage of you. They could trade with your funds for a while. Or want to take advantage of price movements to your detriment. Or negligently drag transactions in a manner that costs you in money or missed opportunities. When that becomes a recurring experience, be sure to find another stockbroker.
- Investment Advisory
Personally running your investing portfolio is possible for you, but there are benefits to using expert advice and support. Your stockbroker may also provide investment advisory service. Ask him. Even where that's not the case in a formal sense, you can still gain insight through your stockbroker. Every trade has some 'insider informations' which only insiders can be on top of. And there are core-insiders too. If you are close to your stockbroker, you may tap a lot of helpful information and advice. Besides, you can ask questions and learn. Using a paid advisory service is not an absolute necessity, but a knowledgeable player giving tips can amplify the success you achieve. There are licensed investment advisors, but brokers also have a lot of practical experience you can use. If a broker is to additionally advice you in a formal relationship, he is sure to charge for that service, but that cost can easily be recouped from the outcome of just one good investment advice. Nothing guarantees that you will get 'perfect advice' all the time but, if your stockbroker is good, the value of his advice will soon shine out.
- Fund Management Services
You don't want to hassle yourself with stock analysis, market tracking and all those chores that are the basis of stock investing success? There is the option of getting a broker to manage a fund for you. You provide the fund, he takes all management decisions and runs the account. That will be a special service and they usually split the earnings with you, in a pre-agreed ratio. It's your money, so the lion's share should come to you. To protect yourself, it's best to have a guaranteed minimum return which the broker should earn on the investment (that conditionality will cost you a little more, but puts the burden of a loss on him).
- Stock Verifications
When you want to sell your stocks, or simply want to dematerialise (dispense with share certificates by getting into the CSCS depository), your stockbroker will handle the processing. The certificate, with your signed share transfer form, will need to go to the company registrar, for verification. It simply requires forwarding your certificate to the stockbroker, completing the simple share transfer form and giving the instruction you want. The broker will do the rest. Some stockbrokers charge a little administrative fee for processing this, while some don't.
- Other Registrar Runs
Getting things sorted with share registrars is never an easy process, though things are improving with many of them getting all or parts of their transactions automated. If you've lost a chare certificate and need a replacement, this could prove tedious, requiring several visits to the registrar. Your stockbroker goes there all the time to process various transactions (they usually have somebody doing the runs). Your best option is to let them handle it - you sign required documents and they forward and track the replacement, which usually takes some time. They can also help process a revalidation of expired dividend warrant for you at the registrar's.
- Transaction Records
As a serious investor, you would be expected to keep a record of your transactions. But just in case you don't or there is a slip somewhere, your broker also has an account for you which has your transaction details. If you have need for your records and there is a missing link, try your broker out for a statement of your account. That should be a mirror of the one you should keep.
Your stockbroker will also help you obtain statements on your Central Securities Clearing System account, for you.
- Market tips and Alerts, Investment Education
These can be very valuable in achieveing your investment objectives and the stockbroker can be very helpful here. It's not his duty to provide you information or to arrange investment lessons for you, but if you show interest, your stockbroker, because he values your patronage, will likely do everything possible to support you. You can learn, over time, by interacting with your broker and asking questions when you need clarification on investing, stock transactions or other related issues. By virtue of their position, they can gain access to information that can mean profitable opportunities for you. Being close to stockbrokers could mean that you have access to some of that information too.
Operating in the stock market definitely requires the services of a stockbroker because you need them to trade. There are ancillary services and benefits too. So, just take some time to select a stockbroker, if you haven't. Again, this article can be of help in choosing a stockbroker you will be happy with.
|
|
