Readers reviews of
You can add your review of this book by
contacting us . We will then place your review on this page. (You can
request to have your name deleted if you wish)
This is a useful starting point for
those who are contemplating opening a brokerage account. It does a very good job of
explaining the function, role and services of the full service brokerage industry from the
perspective of the broker/client relationship. The book concentrates on how brokerage
activity in the secondary market is executed. The secondary market is where there is
constant trading of shares that have been issued by companies.
The primary market is the realm of
brokerages and large financial institutions. These are the groups that help prepare an
unlisted company for successful listing on the stock exchange. This primary market is
concerned about methods of raising funds from the public by way of floats, or IPOs,
capital raising, capital reconstructions, merger activity and rights issues. This is often
the main source of income for the brokerage, but not for the individual broker.
The primary market is important
because this is the key factor in the credibility gap that creates the potential conflict
of interest in the brokerage advice given to clients active in the secondary market. This
is most commonly described as analysts and brokers actively promoting stocks to clients to
buy when they privately think the stock is a dog.
This is a major issue, and the changes that are being forced
on the US stock broking industry, are quickly passed over in this handbook. The book
implies that these conflicts do not really exist in Australias well regulated
financial system. The implication is incorrect, and the issue is significant. It is
unfortunate it is dismissed so readily.
The book is very much in favour of
full service brokerage and less enthusiastic about internet or discount brokerage. In the
list of questions to ask internet brokers, traders are advised to make sure they can
quickly contract their internet brokerage in case something goes wrong. The book suggests
this can be difficult, and costly. Readers are not advised to ask the same question of
full service brokers.
The book suggests you should ask
internet brokers if they use straight through processing, but the question is apparently
not relevant to full service brokerages. Many experienced investors and traders turned to
internet brokerage services precisely because full service brokerages were very hard to
contact, were slow to execute orders or because the broker did not have immediate access
to a SEATs terminal. There are some
interesting case studies in other books showing the dramatic impact on a million dollar account when a full service broker
went to lunch, leaving a sell order unattended.
I found this lack of balance marred
the book as an objective guide to finding the right stockbroker. I operate a full service
brokerage account and an internet brokerage account and I find I get more service
from the internet account, including the ability to use stop loss and contingent orders-
issues considered relatively unimportant in this guide.
Internet brokers who offer manual finessing of contingent orders
perhaps the best of both worlds are not included in this guide.
The book acknowledges the challenge
of change in the brokerage industry, but
assumes the change is driven by price rather than service delivery. This assumption makes
the book a useful starting point, but not a solution when it comes to selecting a suitable
View our Privacy and Internet Security Policy
guppytraders.com Pty Ltd,
ACN 089 941 560