How to Choose the Right Stock Broker in Australia

1. How to Choose the Right Stock Broker in Australia A Stock Broker is a licensed individual who acts as an agent to buy and sell shares and stock investments on behalf of their client. The Australian Securities Exchange (ASX) dictates that transactions may only be made by a recognised stock broker; therefore, they serve as a liaison party between the ASX and the client/investor Broker Advisor. To serve as an stock advisor, you must be qualified and certified by the Australian Securities and Investments Commission, commonly referred to as ASIC. There are three main types of stock brokers in Australia, categorised according to the level of service they provide. The first is the most comprehensive of the three, and although given different titles at different firms, they are typically refereed to as a Discretionary Trading Stock Broker. These brokers are given full authority to make all trading decisions on behalf of their client and, as the name implies, conduct trades at their discretion. To be allowed to trade on a discretionary basis for clients, most the compliance department of most firms will have internal requirements such as a minimum level of industry experience or the time they have worked as a advisor. A 5 year minimum is typical. The next level of service is referred to as Full Service Stockbroking. This allows the client/investor a small measure of involvement but with as little risk as possible. Although a discretionary advisor is technically also a full service broker, there is usually a distinction made between the two, as a full service advisor will offer the client advice on which stocks to buy and sell, but the final decision is made by the client. The third is an Execution Only Stock Broker. Typically these brokers are used by experienced investors who require minimal advice and input, and simply need to engage a broker to execute their trade. Under this banner also comes Online Stock brokers, who charge minimal brokerage fees and therefore tend to service "mum & dad" investors with smaller portfolios. As well as buying and selling stocks and shares, the advisor may also offer other advisory services on other traditional investments such as debentures, government bonds and listed property trusts, and/or non-listed investment options such as cash management, property and equity trusts. Full service brokerage firms may go so far as to offer a complete financial portfolio tailored to your specific financial needs, including retirement planning. This has become fashionable lately, with the larger retail firms providing Superannuation Planning for their clients. Choosing which advisor to use is a decision that shouldn't be made lightly. Unlike in the US, competition between stock brokers is not as strong, and therefore their services and fees are not as enticing. If you are less experienced and want to give the control of your investments to the advisor, keep in mind that the more responsibility the broker bears, the more they will cost. However, given that playing the

2. market is essentially a gamble, it can be far more expensive to go it alone in an effort to cut costs if you don't know what you are doing. Gamblers are often told, 'don't bet what you can't afford to lose'. The same advice applies to playing the market. If you love the anticipation and excitement, and money is no object, then play to your heart's content and engage the services of a non-advisory firm. But if risk taking is not something you enjoy, and you would rather leave it up to the experts, then you may want to consider handing over the reins to a full service stock broker. Obviously due diligence is a must. For further information or to take a peek in to the world of stockbroking, visit the Stock Broker [http://www.asxstockbroker.com] blog. It educates and entertains.