Can full service brokers give you better prices?

[hissho]

Hi all

just another question on a rainy Saturday: can full service brokers "look after" you and give you a better price than cheap online brokers?

I very much doubt that but i keep hearing some ppl claiming "although full service brokers cost a bit more, you'll be better off cos they are able to get a better price for you" how? they can give your orders directly to market makers...

"a bit more" actually is "a lot more"...some charge $85+GST per leg; some even charge $100+GST per leg!

I'd like to hear some comments from highly experienced traders...

cheers
hissho

[markrmau]

No, they cannot get a better price for you.

They may however have better information than you do, which may lead to more winners, and winners that move further. This is what I have found.

Some are completely cr@p though. They tell you to buy or sell based on some squiggly line on a chart. LOL

[sails]

Hi Hissho,

I asked this same question of Spitrader1 starting in post #24 in this thread: http://www.aussiestockforums.com/forums/showthread.php?t=3892

You mention that FSB's charge around $85 - $100 in fees and in my experience, this is only the starting amount as they are percentage based after a certain amount. If we do the sums, say on 10 contracts, they are going to have to give you 1c better than you can do yourself with an online broker just to break even (let alone being better off).

If a beginner is only trading 1 contract, they will have to get 10c better in price from their full service broker just to break even. If the FSB fees are percentage based, then the fees will also grow with position size, so just increasing position won't necesarily help much.

I believe fees and fills do need to be carefully weighed up. As an example, I have been with OX for some time and while they are great with on-line option spreads, I am disappointed at the frequency that single option orders are routed off to manual processing which, IMO, should be STP (straight through processing) as they are close enough to the money for liquidity, etc (eg BHP). The extra time delay for manual processing has so often come at the price of paying considerably more or just walking away from the trade :banghead:

I have asked them if there is a reason for being routed to manual processing (it doesn't happen all the time), but they said it is proprietory information so they were not able to explain :rolleyes:

So, in a case like this where winning trades are missed or one is paying a few cents more is where the fill is far more important than cheap fees, eg. 2c slippage due to time delay on 10 contracts is $200 so, needless to say, have set up an account with another broker where there is STP on option orders.

I think we need to get the facts on fees and fills and then do the numbers to see what is best in our own circumstances eg. what contract size are we trading; ask the FSB how much of a better price they can do on a consistent basis - can they guarantee it (LOL - but worth asking anyway).

Need to make sure you are at worst covering their extra fees with what you are saving on their fills. Look at your trading style, eg. if time delays are potentially going to work against you, then spending time phoning the broker could cost you a lot more than the little better price they may or may not be able to get you.

Just my thoughts...

Cheers,
Margaret.

<edit> PS - if you are doing spreads with a FSB - remember it will be 2x their fees and unlikely that they will be able to get a 2x better price!

[hissho]

Thanks Margaret

i forgot to mention "at the same time" in my question... if you and i are doing exactly the same trade and you are using a FSB and i'm using an online broker(assume it's STP), will you be able to get a better price than me?

another thought is: if you want to buy an option and it's been going up then yes if there's a time delay at the online broker's end then you'll be better off using FSB. but it's also possible that by the time the online broker gets my order filled the price has come down a little bit and i got it cheap; while using FSB would actually cost you more money. is this possible? am i on the right track?

thanks again
hissho

[sails]

Thanks Margaret

i forgot to mention "at the same time" in my question... if you and i are doing exactly the same trade and you are using a FSB and i'm using an online broker(assume it's STP), will you be able to get a better price than me?
According to the thread I pointed you to, it is possible that you MAY get a better fill than me. But who is actually better off will depend on the quantity traded, fees charged and how much does a better fill offset those higher fees.


another thought is: if you want to buy an option and it's been going up then yes if there's a time delay at the online broker's end then you'll be better off using FSB. but it's also possible that by the time the online broker gets my order filled the price has come down a little bit and i got it cheap; while using FSB would actually cost you more money. is this possible? am i on the right track?
Of course, you can be lucky where any time delay works in your favour!

However, a typical scenario for me is as follows: I have a technical setup and waiting for some volume/price action confirmation - possibly following some intraday sideways action. Price starts to move with some force and volume is confirming. I'm set to buy an OTM option (not spread) and then see a retail order sitting near the mid price on the offer that suits my trading size. I want to zap that real fast rather than pay the MM price of 2-3 cents higher. If I am delayed by being routed to manual processing or having to phone a broker, I could end up being worse off by quite a few cents - and that can amount to a lot of $. This is why I prefer STP for directional trades where I'm simply going long on a single option series and don't want the high fees of a FSB and the time delays by having to make a phone call.

Really does depend on your own trading style, timing, quantity, fees and potential slippage as to whether you will be better off or not.

[tech/a]

My fees are negotiable.

I like a FSB cause if a trade is incorrectly placed then I have someone to check it all for me. I get a record of trades each week emailed.
The odd one which is worth a look.

I pay $30 each way up to $15K parcels and $80 cap regardless of size above.

Execution from time to time leaves a lot to be desired.

[spitrader1]

Hi all

just another question on a rainy Saturday: can full service brokers "look after" you and give you a better price than cheap online brokers?

I very much doubt that but i keep hearing some ppl claiming "although full service brokers cost a bit more, you'll be better off cos they are able to get a better price for you" how? they can give your orders directly to market makers...

"a bit more" actually is "a lot more"...some charge $85+GST per leg; some even charge $100+GST per leg!

I'd like to hear some comments from highly experienced traders...

cheers
hissho

hissho, theres a very old saying that i beleive rings true in the market, "if you pay peanuts, you get monkeys"

the major thing with a FSB is not only ideas they may provide with you, its the edge they have intra day of having a general idea of knwoing where a stock may end up. example if you are trying to what BHP on a day where everything is pointing to you that the stock is cheap but someone actually has a million to sell, well then no matter what you do, you are going to get smashed intra day. Where as a FSB may have the knowledge of that flow and therefore advise you to cool your jets. I always beleive that working with a professional, even if its only as a sounding board, is a good idea.

[Julia]

My fees are negotiable.

I like a FSB cause if a trade is incorrectly placed then I have someone to check it all for me. I get a record of trades each week emailed.
The odd one which is worth a look.

I pay $30 each way up to $15K parcels and $80 cap regardless of size above.

Execution from time to time leaves a lot to be desired.
Tech

You must be getting a better than average deal, probably on the basis of fairly frequent trading?

That's a lot different from my experience with a FSB which was over $100 incl GST minimum, then percentage based on size of trade after that.
Average trades were around $15,000 and I paid nearly $300 in brokerage!
Maybe that wouldn't have been so painful if their recommendations had actually made me money, but (as I've quoted on this forum before) out of 12 recommendations, 10 actually lost me money after one year.

To sell one parcel of GTP I held would have cost over $1000 in brokerage!

Imo most FSB's are pretty good salespeople. Why do you think T3 is going so well? The brokers are pulling in huge commissions so they are telling all their clients who depend on the broker for advice to buy it.

I'd never suggest even inexperienced people should use a FSB. By starting with a few solid blue chips, and using the considerable amount of research which is available, including that on onlinebroking websites, I think it's possible to build returns and confidence without getting suckered into whatever the FSB broker wants to push that week.

Julia

[spitrader1]

Tech

You must be getting a better than average deal, probably on the basis of fairly frequent trading?

That's a lot different from my experience with a FSB which was over $100 incl GST minimum, then percentage based on size of trade after that.
Average trades were around $15,000 and I paid nearly $300 in brokerage!
Maybe that wouldn't have been so painful if their recommendations had actually made me money, but (as I've quoted on this forum before) out of 12 recommendations, 10 actually lost me money after one year.

To sell one parcel of GTP I held would have cost over $1000 in brokerage!

Imo most FSB's are pretty good salespeople. Why do you think T3 is going so well? The brokers are pulling in huge commissions so they are telling all their clients who depend on the broker for advice to buy it.

I'd never suggest even inexperienced people should use a FSB. By starting with a few solid blue chips, and using the considerable amount of research which is available, including that on onlinebroking websites, I think it's possible to build returns and confidence without getting suckered into whatever the FSB broker wants to push that week.

Julia

Julia

that is a horrible record (10 out of 12). You were obviously speaking to the wrong guy...hint, the best private client advisors i find are ones that used to be/have some experience in the institutional side of the market.

[BSD]

Starting from the proviso your broker is actually good (there are some) - I would make these points:

Execution via FSB will generally be better for clients not looking at a screen all day, in illiquid stocks or for large parcels. Plenty of ugly things happen to those orders left in the market in the early morning for investors going to work. You only need one dud order taken advantage-of post a Notice Recived or Newswire rumour to have paid for a year's FSB brokerage.

In executing large or illiquid lines, having a broker finding demand by having instos and other clients on the other side to call to help execute a chunky line certainly gets better outcomes than sitting at home iceberging an order for days.

Unless you are in and out all the time, for small lines in liquid stocks - execution (and $100 for that matter) shouldnt really matter.

In options, I reckon execution is sh!t regardless of having a broker or not. The liquidity remains garbage and market makers are swine.


In my view, brokers really pay their way on information and deal flow.

Good information makes you more money than a 1% fee.

Even for a switched-on investor - a good broker should be able to bring to your attention many opportunities for profit.

ie. when big sellers holding down a stock are finished, information gleaned from briefings/conversations, macro economic news, rumours aplenty, ideas relating to off-the-radar small stocks and trading ideas that may have instos behind them (on the same team!).

The guys who got set in Rinker last Friday afternoon at 4pm had good brokers.

Plenty of good stuff gets traded off the wires and it takes a good broker to see the opportunity and call their best clients.

The social network of a good dealing floor is extensive and a clearing house of information cannot be matched by sites like this.

Some may be able to link you into good tax/structuring advice too

Deal flow is the real bonus though, for decent sized accounts.

An allocation in good placements and IPOs can make clients a multiple of their brokerage and management fees in a day. Getting set in WTF for instance at $2.10 would have earned a lot more than saved $100 or 1% tickets.


Tech, who on earth lets you trade at those rates?

You could be doing 100 tickets a day at that rate (after ASX fees and dealer split) and you wouldn't keep the broker in Crown Lager, let alone Bollinger!


Julia, bad story!

What was the market doing? Was he a spiv trying to make you 1000% ?


DISCLAIMER: I am biased to fullest extent!

[spitrader1]

Starting from the proviso your broker is actually good (there are some) - I would make these points:

Execution via FSB will generally be better for clients not looking at a screen all day, in illiquid stocks or for large parcels. Plenty of ugly things happen to those orders left in the market in the early morning for investors going to work. You only need one dud order taken advantage-of post a Notice Recived or Newswire rumour to have paid for a year's FSB brokerage.

In executing large or illiquid lines, having a broker finding demand by having instos and other clients on the other side to call to help execute a chunky line certainly gets better outcomes than sitting at home iceberging an order for days.

Unless you are in and out all the time, for small lines in liquid stocks - execution (and $100 for that matter) shouldnt really matter.

In options, I reckon execution is sh!t regardless of having a broker or not. The liquidity remains garbage and market makers are swine.


In my view, brokers really pay their way on information and deal flow.

Good information makes you more money than a 1% fee.

Even for a switched-on investor - a good broker should be able to bring to your attention many opportunities for profit.

ie. when big sellers holding down a stock are finished, information gleaned from briefings/conversations, macro economic news, rumours aplenty, ideas relating to off-the-radar small stocks and trading ideas that may have instos behind them (on the same team!).

The guys who got set in Rinker last Friday afternoon at 4pm had good brokers.

Plenty of good stuff gets traded off the wires and it takes a good broker to see the opportunity and call their best clients.

The social network of a good dealing floor is extensive and a clearing house of information cannot be matched by sites like this.

Some may be able to link you into good tax/structuring advice too

Deal flow is the real bonus though, for decent sized accounts.

An allocation in good placements and IPOs can make clients a multiple of their brokerage and management fees in a day. Getting set in WTF for instance at $2.10 would have earned a lot more than saved $100 or 1% tickets.


Tech, who on earth lets you trade at those rates?

You could be doing 100 tickets a day at that rate (after ASX fees and dealer split) and you wouldn't keep the broker in Crown Lager, let alone Bollinger!


Julia, bad story!

What was the market doing? Was he a spiv trying to make you 1000% ?


DISCLAIMER: I am biased to fullest extent!

BSD-that is so close to 100% correct, i think you may be a broker!!

[Julia]

Starting from the proviso your broker is actually good (there are some) - I would make these points:

Execution via FSB will generally be better for clients not looking at a screen all day, in illiquid stocks or for large parcels. Plenty of ugly things happen to those orders left in the market in the early morning for investors going to work. You only need one dud order taken advantage-of post a Notice Recived or Newswire rumour to have paid for a year's FSB brokerage.

In executing large or illiquid lines, having a broker finding demand by having instos and other clients on the other side to call to help execute a chunky line certainly gets better outcomes than sitting at home iceberging an order for days.

Unless you are in and out all the time, for small lines in liquid stocks - execution (and $100 for that matter) shouldnt really matter.

In options, I reckon execution is sh!t regardless of having a broker or not. The liquidity remains garbage and market makers are swine.


In my view, brokers really pay their way on information and deal flow.

Good information makes you more money than a 1% fee.

Even for a switched-on investor - a good broker should be able to bring to your attention many opportunities for profit.

ie. when big sellers holding down a stock are finished, information gleaned from briefings/conversations, macro economic news, rumours aplenty, ideas relating to off-the-radar small stocks and trading ideas that may have instos behind them (on the same team!).

The guys who got set in Rinker last Friday afternoon at 4pm had good brokers.

Plenty of good stuff gets traded off the wires and it takes a good broker to see the opportunity and call their best clients.

The social network of a good dealing floor is extensive and a clearing house of information cannot be matched by sites like this.

Some may be able to link you into good tax/structuring advice too

Deal flow is the real bonus though, for decent sized accounts.

An allocation in good placements and IPOs can make clients a multiple of their brokerage and management fees in a day. Getting set in WTF for instance at $2.10 would have earned a lot more than saved $100 or 1% tickets.


Tech, who on earth lets you trade at those rates?

You could be doing 100 tickets a day at that rate (after ASX fees and dealer split) and you wouldn't keep the broker in Crown Lager, let alone Bollinger!


Julia, bad story!

What was the market doing? Was he a spiv trying to make you 1000% ?


DISCLAIMER: I am biased to fullest extent!

BSD

Actually he was a she, not that that should make any difference.
Looking back at those recommendations, several of those companies are still being recommended by the same broker.

I was told such rubbish as "Coca Cola Amatil is the biggest and best in the world - they will always make you lots of money" "Amcor: even if their costs go up they can always pass those costs on to their customers".
And several others"it's a really well managed company, they make increasing profits year after year".

etc etc. you get the picture.
I was pretty naive in those days and simply thought brokers were such experts that they must be right in what they say.

Was there any discussion about whether or not the SP was rising? Hell, no.
The only message was a fundamental one that this was a terrific company which should be in every investor's core portfolio. And I was silly enough to believe that if a company was considered blue chip then I would have to make money by buying its shares.

So when I queried the falling prices, I was given lots of "reassurance" such as "oh, it's just a temporary supply problem" or some garbage like that, and told not to worry about it - it would all come good!

Actually makes me feel quite sick thinking about it now. I stayed with them for about a year before seeing the light. Now I can't believe I was so stupid for so long.

A friend who presently uses the same broker (yes, I've told her not to) went in there a few weeks ago wanting to buy some ZFX. She was told that that would be really silly as they are just far too expensive and could only go down.

And I'd suggest that my miserable experience is by no means unusual.
There will be lots of people out there who don't own computers, would never think of using online brokers, even by phone, and who have simply never considered an alternative to a FSB.

Julia

[tech/a]

Julia/BSD.

Its a negotiated rate.
Ive been with them 10 yrs.
I dont ask for any advice and I dont charge them for my opinions when they ask!!!

[greggy]

Julia/BSD.

Its a negotiated rate.
Ive been with them 10 yrs.
I dont ask for any advice and I dont charge them for my opinions when they ask!!!
I've been burnt too often by full service brokers in the past. Hence, I'm now with Comsec and make my own decisions.

[sails]

...Starting from the proviso your broker is actually good (there are some) ...!
Perhaps there are some, however judging by the way retail traders generally discuss this issue, good FSB's seem to be rather scarce.


In options, I reckon execution is sh!t regardless of having a broker or not. The liquidity remains garbage and market makers are swine.
I understood that Hissho started this thread with the options market in mind. My experience has been that I am much better off for options trading with a carefully selected online broker that suits my trading style.


Deal flow is the real bonus though, for decent sized accounts
Possibly for "decent sized accounts". If FSB's gave everyone the same service regardless of account size, who would be left to take the other side?

IMO, it all depends "what's in it" for the broker at the time and he/she is in the business to make serious money.

I have been led to believe over the years that, if push comes to shove, "smaller sized accounts" may well become cannon fodder for the "decent sized accounts" - is this correct?

[RichKid]

My fees are negotiable.

I like a FSB cause if a trade is incorrectly placed then I have someone to check it all for me. I get a record of trades each week emailed.
The odd one which is worth a look.

I pay $30 each way up to $15K parcels and $80 cap regardless of size above.

Execution from time to time leaves a lot to be desired.

Tech,

Does your broker also trade tech trader for you? If so that's an added benefit in that you don't have to worry about that side of things- do you have to call or does he just do it for you? Apart from that has he ever provided you with any really invaluable advice or information?

Your rates are very good so it must be the long term relationship and the parcel sizes you trade so frequently that does it for you.

btw, at what stage of your relationship did they start offering you these low rates?Did you approach them first? Did you have to turn over a fair amount before they noticed you (in terms of your ac size- I'm sure you're hard to miss in terms of personality, maybe they have a nickname for you too??? hehehehe....)

[Magdoran]

Julia/BSD.

Its a negotiated rate.
Ive been with them 10 yrs.
I dont ask for any advice and I dont charge them for my opinions when they ask!!!Hey tech,


Are you talking options contracts or shares?

That rate is really cheap for option contracts, and I don't trade shares much (haven't for over a year), mainly options. My FSB is negotiated too, but nothing like you're getting. You must be one hell of an arm twister!


Regards

Magdoran

[RichKid]

Oops! Thanks to Sails & Mag I've just realised we're probably assuming it's shares rather than options FSB that we have been considering!!

My guess in relation to your last question mag is that tech is talking shares as he doesn't trade options from memory, let's see what the Mr Tech/a says.

So it looks like we'll have to just discuss options FSB but I'm happy to move this to the general stock chat forum so we can discuss all forms of brokerage...but let's try to stick to options brokerage only...great discussions so far, clearly a few people here know the industry well.

[DT_Futures]

to put it simply in australia no, in the US yes.
simply because of the floor...and what exchange you're trading on...

[Magdoran]

Hi all

just another question on a rainy Saturday: can full service brokers "look after" you and give you a better price than cheap online brokers?

I very much doubt that but i keep hearing some ppl claiming "although full service brokers cost a bit more, you'll be better off cos they are able to get a better price for you" how? they can give your orders directly to market makers...

"a bit more" actually is "a lot more"...some charge $85+GST per leg; some even charge $100+GST per leg!

I'd like to hear some comments from highly experienced traders...

cheers
hissho
Hello hissho,

Just a few points about FS option brokers. If you know what you are doing in options, a reliable online broker is fine for many transactions, but sometimes a good FSB can be very helpful getting a good off market deal if you’re dealing in serious quantities or complex spreads.

Some MMs may be prepared to negotiate for a larger order that still conforms to their risk and profit parameters. This is more common though for dealing with OTC instruments like warrants. A good FSB who knows the right people can shave off the price (my FSB certainly has).

The advantage for newer players in using a FSB for options (provided you find a good one) is that they can offer good advice about volatility and which strikes are better suited to your selected strategy based on your market view (as well as helping you to construct strategies). This is why you need to find a good options broker (if you decide you want a FSB) who knows their stuff both in terms of how the game is played, as well as being across options theory, especially volatility.

So a lot depends on what you need, and how good a FSB is, hence I hope this clarifies some considerations rather than giving a simplistic “no” or “yes” type answer without qualifying it.

I learnt a great deal from my FSB in my early options days. He was very experienced in the field, and knew a lot about an array of things I would have taken a lot longer to figure out by myself, so the right FSB may short cut your learning time, but this depends a lot on the individual. Of course a good mentor is a must too if you can find one (and perhaps as an alternative, but you really want someone who can help you in the areas you want to develop in, and that you can trust).

It’s great if you can find a good broker by recommendation. I feel for Margaret who got a raw deal. This kind of poor service is inexcusable, but they’re out there, so beware. That kind of “advice” on fundamentals tends to work better (firstly assuming it is good fundamental advice) in the long term with long dated warrants and options.

Not many brokers are that hot at T/A (T/A tends to suit position trading more in my view over F/A), hence my strategy was to find a broker who knew about options rather than technicals. It’s up to you of course.

I tend to do most of my own work now, so I’ve used online brokers a lot more now (recently started using a new one, and have been testing it out – seems to work well).


Regards



Magdoran