In a pre-recession era when the world financial markets rose consecutively on a yearly basis, investors found the task of finding returns for their portfolio an easier task. With a lot of long only fund managers able to replicate or beat an index performance, it was for many investors a question of which would maintain these returns.
Since the 2008 global financial crisis, many investors have taken the management of their investment portfolios into their own hands as stock markets fell. This was done with the idea that their own investment picking abilities may return above and beyond that of a regular basket of stocks, or an index tracker purchased for them by their investment manager.
There have been a number of reports which show that more investors than ever are moving away from having their money managed in funds, instead the industry is moving to a model where by private individuals make their investment decisions on their own behalf. With this in mind, and when looking for the first time at how one could invest their own capital, there is a lot of information available online which can be daunting. Investors have a lot of different brokers to choose from, offering a lot of different services, covering even more financial products.
In order to approach this sensibly, each person should start with a clear idea of what they intend to invest in and with what frequency. Most firms now offer clients a web-based trading platform which gives access to all of the world’s financial markets from one central, easy-to-use, website. Companies that offer a trading platform will also offer a news feed and charting packages for account holders in order to provide people with the most up to date and easy to use research tools available, which is a great bonus for investors.
There are a cross-section of services available to investors, ranging from Execution Only, where investors place trades and buy and sell investments on their own through the web, to an Advisory service where trades are recommended to clients, to Discretionary where brokers can place trades on a client’s behalf, with different account charges to match.
Over the last few years there has been a developing trend, where people want to manage their own investment portfolios, but with an ‘exchange of ideas service’ with a professional and at a competitive commission rate.
In today’s market, information on companies is readily available on the internet so anyone can perform the role of an analyst. Many people shop at Tesco and fly on EasyJet and are aware of the prices of products these companies offer, so can make a judgment call themselves about how the company is performing.
With this market-development, many brokers are now there to provide clients with a price at which they can buy or sell and also a professional view of the market; with up to the second information about the companies or assets they are looking at investing in.
Investors feel that when dealing with larger stock brokers they are treated as an account number and not as an individual, similar to when you deal with your bank. Todays active investor requires a personable service from someone who understands their own investment aims and can respond proactively to it. Having someone at the other end of the phone that understands what it is that that client is looking for is an invaluable asset to any investor.
As with supermarkets over the last 5-10 years, financial services customers have become more savvy and are more willing to shop around for a competitive price and good customer service, opposed to being with the same fund manager for many years as may have been the norm in previous generations. This leads to a decline in costs for the end client as firms compete for their business and some clients are often choosing to pay more than the minimum commission available in order to gain a professional brokers input when making an investment decision.
The investment thesis used by many when taking the management of their portfolio back in to their own hands, is to purchase a smaller number of stocks than would be found in the FTSE 100 index or previously owned by their investment manager, there in trying to select which may perform well and avoid owning stocks which may be viewed as riskier, and overall to produce a better return than the comparable index.
KBW Associates offer an Execution Only, Advisory and Discressioary trading service, covering professional investors in the UK and Europe. For more please see: www.kbwassociates.co.uk