Online broker ignorance - help!

Discussion in 'Sharemarket Investing Platforms, Tools & Services' started by JaseK, 12th Jan, 2018.

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  1. JaseK

    JaseK New Member

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    Hi guys and gals

    Hoping someone can kindly clarify for me, given my ignorance of all things stockmarkety... :(

    I want to throw some funds into some high quality LIC stock then set and forget for a while..

    I understand to do this, I need to use a (let's say online) broker..

    I understand there are fees involved for such buy and sell trxs and that the brokerage site offerings of the big 4 banks, while let's assume to be more robust, hit you with a higher charge for the privilege..

    I understand that alternatively, there are smaller (perhaps fly-by-night) online brokers, which at first glance, seem to charge considerably less.. However, might one assume if there's a hiccup in the market / their brokerage is being poorly / deceitfully managed, a cheaper broker may be more susceptible to disappearing from the face of the earth overnight..

    And so here comes my astute concern / blatant ignorance.. (take your pick..)

    If I DID choose the cheaper, fly-by-night online broker, after which they DID fall over, would my investment be at risk, even though it would now be all invested in a completely different (i.e. LIC investment) company?

    The way I see it, I'm simply using the online broker as a 'vehicle' to transfer my funds.. Once transferred, my funds would be 100% owned by me and my risk exposure would then lie within the bounds of the LIC company's performance and nothing else right?

    OR, would the online broker somehow still have a stake in my now invested funds, e.g. to use as a liquidation source for their imminently circling creditors...

    I ask, since reading (yet not fully understanding) about the Storm Financial, BBY Ltd, Opes Prime fiascos; the latter of which as I understand it, saw the majority of mums and dads investors lose their investments to ANZ Bank, once it decided to call in on Opes Prime's debt...

    Would be grateful if someone intelligent out there could set me straight. Thanks alot for your time.
     
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  2. twisted strategies

    twisted strategies Well-Known Member

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    welcome to InvestChat ,

    ( disclosure ... i have on-line accounts with Commsec and Bell Direct but also hold BFG shares .. the parent group of Bell Direct )

    i previously held an institutional account with a full service broker but we have parted ways , nothing nasty but i don't currently need the extra bells and whistles ... maybe again in the future ???

    with on-line accounts DO NOT expect fancy utilities ,

    the combination of the two accounts i have works for me , each platform has it's own strengths and weakness ( different weaknesses but still usable as a pair )

    initially i was hoping to be a buy and hold investor , but it soon became clear to me i needed to be more active ( but not actually trading )

    when checking out your future platform ( allow for the possibility you may need to buy or sell more often than originally planned )

    *** fly-by-night *** has happened in the past ( and may happen again ) and a major bank offered platform may be no safer if that bank implodes ( not completely impossible ).

    the broker implosions you mentioned should NOT have happened , but they did which must raise some questions of the regulator .as well .

    i assume the burnt investors did NOT let the brokers use the shares as collateral ( via margin loans and other control schemes ) but time may prove me incorrect on that .( some do not let you hold/control the shares directly .. a fairly big international broker i believe does this )

    size does not make a broker more likely ( or less likely ) to fail ... that is a matter of governance ( huge businesses implode just as much as tiny ones when badly run )

    when signing up for an account check carefully what goodies are free and what they charge extra for .. both my accounts charge to buy and sell ONLY ( not counting any penalty charges if i stuff up ) i ask for no special add-ons ( which might attract fees in the future ).

    in the market greed is endemic , so expect it and look for unfair angles to deals ( RESEARCH CAREFULLY ).

    one 'left field option ' would be to buy your shares ( units ) via an IPO ( or share placement ) direct from the company ( actually the corporate share registry ) and leave them as 'issuer sponsored ' ( not convert them to CHESS holdings ) , in theory not needing a broker at all ( but that will make selling them a pain , if you need to )

    i hold GETB ( dual listed in London and Frankfurt ) like this . ( i am not planning to sell them so possibly not a problem , yet )
     
  3. JaseK

    JaseK New Member

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    Twisted Strategies, thx so much for your input. It's helped to clarify a somewhat grey area for me (and perhaps others reading this..)

    If someone has time, that's a slightly related question.. Issuer vs CHESS Sponsored stock..

    I understand that CHESS is essentially the name of a huge ASX IT system that says Joe Bloggs owns stock 'x' in company 'y'.. and that the majority of brokers leverage this system given ASX is the entity allowing us to trade in Australia.. It's logical, easier for brokers to plug into and use as a 'shared black-box'..

    ...and so how specifically, might CHESS sponsored stock pose as a risk more so than Issuer sponsored stock?

    i.e. would CHESS sponsored stock inherently provide a broker with some kind of hook to still 'hold onto' your stock instead of you owning it 100% in your name?

    Thx for clarification.
     
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  4. twisted strategies

    twisted strategies Well-Known Member

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    CHESS is essentially a clearing house for transactions ( share trades ) but say a company goes into administration , but does not collapse completely , continues as an unlisted ( non-tradeable on the ASX ) and in an ASX listed stock in a changed format ( usually consolidated capital ) it can be become 'issuer sponsored ' ( which can be converted back to CHESS-sponsored if you choose )

    in my cases of ASX listed ( but issuer sponsored ) stock the restructured stock holding has become so devalued it isn't worth the brokerage fee to offload ( in once case 1,000 old shares became one new share .. which when relisted on the ASX quickly slump to near worthless .)

    while your concerns about avante-guarde stock-brokers has some foundation , dud boards of directors and management in a company are a much greater risk .. Slater & Gordon , Gunns , Arrium, Hastie Group , Dick Smith Holdings to name just a few of the bigger the companies .

    IN THEORY unless you enter into an agreement for a margin loan ( or some other special agreement ) your shares stay in your name or the account trust name until you decide to sell ( normally via your broker , but say you accepted an off-market take-over offer , that would bypass the broker .. at least in relation to your transfer costs .

    issuer sponsored shares become a direct relationship between you and the company's share registry ( say Computershare ) and not via a broker trading account ( as in the case of GetBusy which could be traded in :London or Frankfurt but with extra paperwork and costs )

    and let's face it some shares ( i hold ) may never be traded ( or transfered ) in my life-time , do i really need them in a broker account if acquired off-market .

    CHESS is convenient if you want to buy more in time on market ( say MLT , adding an extra parcel roughly every 2 years ) or quick selling down ( if your share quadrupled in price and you decide to take some cash risk off the table .

    BUT please check your paperwork with any new stock-broker agreement ( just in case )

    when Linc Energy transferred to a Singapore Stock Exchange listing , i could not find a suitable stock broker agreement , so i sold out on the last week on the ASX listing ( swapping into Blackmores @ $21.95 , as a 'boring old granny investment stock ' .. oh dear .. the right stock , but did i make the wrong assessment on it .

    as you see your stock investment plan , you should look for a stock-broker that only charges fees for when you buy or sell shares through them ( no ongoing fees and charges ), this ISN'T always easy to spot , some will package in 'live-data ' and research at 'minimal monthly costs ' but those goodies you rarely use soon rip into your returns
     
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  5. JaseK

    JaseK New Member

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    Mate thankyou. It's great to hear input from someone more experienced and knowledgeable than myself. I shall look into the various brokers on offer with more 'careful vigour' now, rather than with complete ignorance.. Wishing you well in your investment performance!

    Thanks all
     
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  6. Hodor

    Hodor Well-Known Member

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    Given this is a few $ brokerage even an issue?

    I use Commsec, about the most expensive online broker, because it keeps all my banking etc in one place. If I was an active trader then I might consider brokerage costs.
     
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  7. twisted strategies

    twisted strategies Well-Known Member

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    *** I use Commsec, about the most expensive online broker ***

    ???? sorry , at budget ( no bells and whistles ) level i have found Commsec competitive , after you dig through the fine print of most of the competitors ,
    if i had of dreamed i was going to be so active i would have joined up with MacQuarie and earned all the bells and whistles as bonuses , but that was my ( probably incorrect ) choice , i never dreamed i would inherit any estate let alone two of them .

    i still like Bell Direct ( enough to hold BFG shares ) and have had issues with Commsec ( sometimes the fault of a 3rd party , as well ) but did check out BOQ , NAB , WBC and some others but didn't see enough benefit to get me to sign up

    ( i aso hold MQG , WBC and BOQ shares )

    my crystal ball is broken , but my reariew mirror suggests i have been comparatively lucky .

    i still TRY to be 'buy and hold ' but aren't there some pressures twists and opportunities ???
     
  8. Hodor

    Hodor Well-Known Member

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    NAB, ANZ and WBC were all cheaper per trade last I looked. Only a few dollars.

    It goes without saying Full service brokers are a different animal
     
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