About half the Australian adult population own shares either directly or indirectly, making the nation a world leader in share ownership based on Australian Stock Exchange figures.
It's this increasing level of share ownership that is partly driving the increasing choice of broking services.
A lead indicator of broader investor sentiment is trading activity. Strong trading volumes over the past quarter suggest many investors are getting back into the market, or are joining the share ownership ranks for the first time.
In the past, the only option when buying and selling shares was to use a full-service broker who did all the work for you. These days, online trading and the use of advisory or non-advisory broking services give investors greater choice.
Telephone-based non-advisory brokers were the pioneers of discount stockbroking. People would simply phone the broker to place an order. No advice, research or recommendations were made by the broking house.
Once the internet took off these non-advisory brokers branched out, and now typically offer both phone and online services for about $20 to $35 a trade.
"Non-advisory brokers suit people who are self-directed investors, want control over their investments and can do their own research," Westpac Broking director of sales and service Russell Karlson said. "They also suit those who may have a shareholding from one of the larger floats such as Telstra, AMP or CBA to sell cost-efficiently, or want to build on that holding to establish a more diversified portfolio.
"This form of broking tends to be less expensive and, more importantly, offers convenience. You simply go online or call the trading room, place a trade and it happens in a matter of seconds."
Of course, if you use a non-advisory broker you will have to make your own decisions about what shares to buy and sell. For this reason, it may be worth seeking professional financial advice to help understand the risks of investing and investment fundamentals such as diversification and risk-return trade-offs.
Many online broking sites offer news and research data. You can monitor individual stocks and track your orders. They may also offer services such as managed funds, options, interest-rate products and structured investments.
"Importantly, a good discount broker can access floats and initial public offerings, something many clients are keen to participate in," Karlson said.
There are also online/phone brokers who offer advice. They generally charge between $50 to $70 a transaction.
By comparison, full-service advisory broking tends to suit people who wouldn't consider going it alone, do not have the time to research companies sufficiently or who have complex financial arrangements.
A full-service broker will make recommendations and provide research on companies at a premium. Charges may be either a percentage of the trade or a flat fee, usually about $80 to $120.
You may want to bear in mind that some full-service broking firms have come under scrutiny recently, particularly in the United States, over potential conflicts of interest that result from the dual function of many investment banks that is, the independence of the research analysts and the independence of the investment banking function.
Getting your fair share
To help you find a reputable broker, see the Australian Stock Exchange website www.asx.com.au .
The site is packed with plenty of information on the various types of brokers, with a list of advisory and non-advisory brokers in your region.
Before you select a broker, the ASX recommends checking the types of services it provides, how it charges, whether it supplies a regular newsletter or information on new sharemarket opportunities and what details are on its website.
Also check whether the broker, or the broker's firm, is associated with any of the companies for which investment products are recommended.
Linda Gough is an executive vicepresident with BTFunds Management. This information doesn't account for your investment objectives, particular needs orfinancial situation. These should be considered before investing and we recommend you consult a financial adviser.
