Many people have a rather limited knowledge of investment, and until they venture into that particular pool they often fail to realize the diversity of services available to them. It is not a case of being thrown in at the deep end and expected to swim: there are shallows by the shore, and ledges to rest on along the way, in the form of discretionary and advisory brokering services.
You see, the way the stock market has developed allows anyone and everyone to become involved in investment. Different types of services are available to suit different skill levels, the amount of time you have to devote to research and your confidence in investing. Three levels of brokering services exist: discretionary, advisory and execution-only, so that no one is left to sink or swim alone.
Discretionary services tend to be ideal for those unfamiliar with the stock market or short on time to devote to their portfolio. They give your chosen broker the power to buy and sell shares on your behalf, using their own discretion and expertise rather than yours. This allows the broker to work quickly and effectively, as they can respond to split-second market changes without having to consult you first. Although this is ideal for cashing in on fleeting opportunities, you have very little power over what you buy and sell, which can result in more deals than you would really like being conducted. They also tend to cost more than other services, and many suggest that it’s only worth the extra spend if you’re looking to invest £100,000 plus.
One of the simplest ways to think of advisory services, like those offered by Sanlam Private Investments, is to see them as a stepping stone between the puppetry of discretionary stockbroking and the complete autonomy of an execution-only service. They give the account holder the final say over what to buy and sell, but provide an experienced stockbroker to guide your decisions and offer any advice that you feel necessary, such as how to achieve long-term investment goals. The stockbroker will not invest without first seeking your permission, and it is entirely up to you whether you take their advice. As well as requiring less time on your behalf than a full execution-only service, advisory alternatives can also be a great way to learn the ropes before trying to trade independently.
Execution-only services grant full autonomy to the account holder, meaning that any trades made by your broker are transacted based on your instructions alone. This tends to be a route reserved for more experienced investors, as it’s very easy for the inexperienced to be lost at sea when left to their own devices. Therefore, even though this is the cheapest service available, in most cases it’s also the most high-risk avenue to investment.
Which stockbroking service will suit you?