++Who’s The Best Broker For You? ++

Change is in the air in the brokerage industry. In spite of the record trading volume last year, the tough environment this year is forcing brokerage firms to be pickier about clients. The merger between Asset Plus Securities and ABN Amro Securities is a case in point where the medium-size firms want to get bigger in order to survive and the smaller ones are struggling in vain hoping that the golden days of 2003 can be repeated again this year. Not only are market sentiments notoriously difficult to predict, which explains the divergent in the daily trading volume, but the industry is not producing enough marketing officers to go round and the new rules make it more difficult to “poach” staffs from competitors. So what does all this mean to ordinary investors like you and me? Which broker is right for you? In this issue of M&W, our survey will help you find out.

Ever since the brokerage industry moved back to a fixed commission basis of 0.25% per trade in 2002, essentially, you can pick any brokers since the costs are the same. But the intense competition among the brokers has moved from cutting commission fees to other areas. (Although, there are still unconfirmed reports that traders with big volume are still getting away with commission “rebates” of one form or another). The good news coming out of all this maneuvering is that there's now a broader array of brokerage services for you to choose from. Some of these services include mobile/on-line trading facilities, private funds/mutual funds services, investment advisory/wealth management programmes and customized research. However, all these services don't come cheap and not all 40 brokers offer them in equal amount and quality.

Based on a range of criteria, including number of marketing officers per client ratio, research capabilities, on-line/mobile trading platforms, private funds/wealth management services and minimum opening balance, we are able to grade the 40 firms into the 3 major groups. As the name suggests: Basic/No frills means just that. These are firms that offer minimal services for a fixed commission. No research, no web site, no personalized services like private funds or wealth management. However, this does not mean that these firms are no good. In fact, they are suitable for those that want to trade cheaply without any help from their brokers. In the middle, are the Premium-service firms . These brokers offer fairly comprehensive services but fall short of a full-service. They are well suited to investors with medium budget who can take care of themselves. At the top end of the food chain, are the so-called Full-service firms . These are the “Rolls Royces” among brokers with private funds/wealth management services for high net-worth individuals, full research capabilities, on-line/mobile trading platforms, fancy web sites etc. Again, only the rich and big volume traders qualify for such services. Like everything else in life, you get what you pay for and brokerage services is the same.

• Are your combined assets in a brokerage account more than Baht 4 million?

• Do you feel overwhelmed by the complexity of tax or retirement planning?

• Are you too busy or do you lack the expertise to research your own investments?

Let's stop here for a moment. If you answered yes to question 1 and at least two “yes” of questions 2 through 6, then you should consider opening a brokerage account with a “full-service” firm. You will be able to work with a broker, who can create a portfolio to help you reach your investment goals, choosing suitable investments that fir your asset-allocation profile and tax planning needs. Otherwise, continue to question 7.

• Are your combined assets in a brokerage account more than Baht 1 million? Or do you trade at least 8 times a year?

• Have you sought an Investment Planner's or broker's advice on asset allocation or portfolio building within the last 12 months, or wished you could?

• Are you unclear about how your current investment portfolio meets your goals and fits into your overall financial plan?

If you answered yes to question 7 and at least two “yes” to questions 8 through 10, consider opening a brokerage account with a “premium service” firm. They offer advice on an as-needed basis, a good solution for the independent investor who occasionally wants expert help with long-range planning or investing advice. Otherwise, consider the firms in our “ basic/no frills” category. These firms do not provide much assistance, but they have low account minimums.

In the full-service category, we place the most weight on account amenities, quality of service i.e. no. of clients/marketing officer ratio, research capabilities, on-line trading platform and private fund/wealth management services. The costs are typically high, therefore, only customers with six-figures and up account need apply.

Those of you that need a broker's input every once in a while, but don't want to go the full-service route, should consider the “premium service” firms. In ranking these firms, we put more emphasis on the kind of advice available and how minimal account balance.