Selecting a Broker

After MF Global, what is your criteria to shortlist?
How much research do you actually do?
If I buy all my shares through NAB Trade, and NAB goes bust, what happens?

So far I have researched only one Broker - IB
They are insured under the SIPC, but that doesn't seem to count for much
Why no one should use brokerage accounts

They're also insured by Lloyds of London and they claim to 'hold no more than 5% of their capital in any one bank' But they're all US banks...
List of banks acquired or bankrupted during the Great Recession - Wikipedia

Obviously the AU systems are much more trustworthy and conservative, which raises the question, what is the SIPC equivelant here, and have we seen it in action?

Personally, I wont be re-investing dividends or making many trades, and I wont require any research subscriptions, so brokerage fees and full service are irrelavant. Ongoing fees, transfer fees and reporting is.

Anyone here with International direct stock holdings that have split their portfolio across 2 or more Brokers to hedge against real capital loss? Or does everyone just simply use one of the big 4 CHESS sponsored brokers and call it a day?

 

Interesting news at work today

Record number of millennials take to share investing
CommSec halves brokerage to support the new wave of share investors.



In the face of challenges with housing affordability confronting the millennial generation across Australia, data released by CommSec today shows they are now the largest group of new investors taking up share investing.

More than 50 per cent of all new customers to CommSec are under the age of 35, showing younger Australians are turning to the stock market to invest, build wealth and save for their goals.

In response to this emerging customer growth, CommSec today announced a halving of online brokerage for lower value trades to make smaller investments more affordable to the millennial group.

Over the past five years, the number of millennial investors has increased by 51 per cent, now representing 28 per cent of all active CommSec customer accounts or approximately 70,000 trades per month.

“Young investors have embraced online share investing as a means to take control of their finances and save for their financial goals. However, it’s important that new investors understand the risks and benefits of the share market and that they are making informed investment decisions,” says CommSec Managing Director Paul Rayson.

Millennials look for greater returns
Data on typical portfolios suggests that millennials have differing approaches to risk and return.

Many younger investors are investing in blue chip stocks (well-known stocks) that pay dividends with more stable share prices.

However, some millennials are choosing to invest in growth stocks (stocks that may have higher growth potential but can be volatile and may not pay a dividend). This may reflect that younger investors have a higher risk appetite or longer term investment horizon or it may reflect a lack of understanding of the importance of diversification.

Millennials are also investing in ETFs (exchange traded funds) to increase diversification by tracking a market index or basket of stocks rather than investing in an individual stock. In 2017, millennials accounted for 25 per cent of all ETF trades via CommSec.

Bigger users of mobile and technology
This new wave of share investors are also big users of mobile and represent up to 50 per cent of all mobile trades made through the CommSec mobile app.

“Technology has made it easier for us to support new investors with online tools such as CommSec Learn - a series of online tutorials that teach the basics of selecting and managing investments - and portfolio checks to better educate on share quality and diversification,” Paul says.

“It’s important that their first thousand dollars of hard-earned cash is invested wisely so they can build their capability and confidence to invest for the long term to achieve their goals.”

 

Good way to grow a deposit by investing in shares first. I did the very same thing back in my 20s when I sold a car. I invested 5k in a managed geared share fund with monthly dollar cost averaging. Rolled it into a property 4 years later when it hit $3.94/unit starting at $1/unit initial buy in.

 

I bought shares during the tech boom, then shorted during the tech wreck. This helped me get into my first and third properties. Number 2 was general savings and equity.

 

If you are buying bog standard shares you won't have any problems if your broker goes bust - the share registries will track your ownership and your investment stands or falls depending on the company you've invested in, not the broker who is sponsoring your shares in the CHESS system.

MF Global collapse was a problem for those with CFD accounts and other sorts of exotic derivatives. This is because you don't own anything - you have a contract with the provider where you are betting against them. In that situation it's pretty much the same as if your bookmaker goes bust - you aren't going to get paid.

 

That would be the SEGC (Securities Exchanges Guarantee Corporation).

In the event of an ASX participant (broker) going bust then first steps are ASX clearing corporation trying to sort out the mess. Once that is completed then you may have call on SEGC for compensation if you lost money. They have a fund of $100M+ to payout claims from.

http://www.segc.com.au/pdf/ngf_information_booklet.pdf

They were in action with BBY collapse in 2015.

 

@marty998, @Cadbury99

Much appreciated thanks guys