Take stock and find the right broker to get the best advice

In turbulent economic times when many savings products are not even keeping up with inflation, it’s more important than ever to find the right stockbroker. Over 12 million people invest in stocks and shares to secure their financial future and their choice of stockbroker can be a vital part in ensuring that success.

The range of services may be summarised as:

n Advisory, where the broker offers advice and will always consult prior to executing any purchases or sales. Often there is an annual fee based on the portfolio value.

n Discretionary, where the private investor delegates all dealing, portfolio management and custody to the broker who acts within agreed parameters. Again, an annual fee – higher than for advisory – will be levied.

n Execution-only, where the broker simply carries out the dealing transactions and may provide an appropriate tax wrapper (such as for an Individual Savings Account or Self Invested Personal Pension).

With some 150 stockbroking and investment management firms, there is a good choice. Consider how wide a pool of investment options are available (both for the UK and globally), quality of research, costs and securing best execution on trades.

When it comes to the range of products available, some budget brokers limit clients. It should be possible to access UK and international equities as quite often good companies do not offer a London stock listing.

The luxury goods maker LVMH – from top fashion to Champagne – is just such an example with listings outside the UK in such centres as Paris, New York and Toronto.

Investment trusts, other collectives, corporate bonds, exchange traded funds as well as subscription shares and zero dividend shares should also be on offer. Good stockbrokers will guide as to which is the most appropriate vehicle, taking into account attitude to risk, other client needs and the tax situation.

When it comes to cost, look at the overall expense rather than simply the topline commission paid. This means that investors sometimes fail to distinguish between an execution-only trade on a retail service provider platform by comparison with someone calling into the market to ensure the best execution and tighten the spread between the bid/offer price.

Many take out investments with little ongoing maintenance, notably in ISAs. Yet continuing research and information on assets held with a stockbroker who is pro-active can really pay.

Following last month’s tragic natural disaster in Japan, brokers who were on the boil advised clients to take advantage of those funds or investment trusts where the net asset value had temporarily dropped but where the long-term prospects were attractive.

If taking the advisory route, ask in what ways and frequency will the stockbroker make contact.

Some clients like a monthly reflective note on the markets and a few recommendations whilst others prefer a more active approach.

As a good professional guide, your stockbroker should provide a personal, approachable independent service that marries investment and financial planning expertise and seeks to preserve, grow and protect assets.

Paul Killik, of private client stockbrokers Killik & Co, sums it up neatly: “We view ourselves as our client’s agent, acting for our clients as they would act for themselves if they had our knowledge and experience.”

Killik was founded in 1989 and looks after over £2.5bn on behalf of more than 25,000 private clients.

Geographical proximity is important to some. Brewin Dolphin is the largest independently owned private client investment manager in the UK.

It has a key Leeds office headed by Martin Payne, one of 41 in the UK and Channel Islands with £23bn under management.

Mr Payne says: “Our focus is on providing investment advice that is as unique as each client’s needs. We have worked this way for generations.” The firm was formed in the mid 18th century and can trace its origins to a founding firm of the London Stock Exchange.

In Leeds, Brewin Dolphin employs 38 staff to manage over £900m of client assets.

Rensburg Sheppards are also noted Leeds stockbrokers with a strong team headed by Simon Kaye who has over 25 years of investment management experience. The firm is particularly noted for private client, trust, pension fund and work for charities.

Venture capital, now even more attractive following the March Budget, is the speciality of divisional director, Barry Anysz, who also has a detailed knowledge of the Alternative Investment Market (AIM).

“Rather than slotting you into someone else’s financial model, we build a service around you,” says Jonathan Baker of Charles Stanley in Leeds.

The firm has 33 offices in the UK. On the advisory side, each investment manager monitors a client’s portfolio to ensure it stays balanced and in line with pre-agreed investment goals.

Their impressive stock market bulletin and investment handbook are issued monthly. In May 2009, Charles Stanley launched two investment trust model portfolios, one aimed at growth and the other income. Since then, they have increased by a stunning 56.8 and 35.4 per cent respectively.

Redmayne-Bentley is another noted Leeds stockbroker. Established in 1875, it regularly wins major national awards for its investment management and share dealing services.

Discretionary management accounts for 75 per cent of assets managed by private client specialists, Smith & Williamson. Founded in 1881, it has 11 offices.

Many investors use their in-house funds which cover main market regions and some specialised sectors.

One of the attractions of using a full broker service is that they can hold shares in a nominee account and at the end of each tax year issue a consolidated tax note which has all the required information in terms of dividends and tax credits.

Tax management should be an integral part of a stockbroker’s services. By managing capital gains and using vehicles like ISAs, they can ensure assets grow in as tax-efficient a manner as possible.

Finally, do not forget that all the brokers mentioned have a wealth of experience in advising on investing for children and grandchildren. The earlier such acorn savings start, the surer will be the financial oaks of the future.