Stockbrokers go hand-in-glove with investing in Singapore’s stock market like butter on toast. A trading account, which you open with a brokerage, is just as necessary for share investing as your account with the Central Depository or CDP.
Choosing a stockbroker or a brokerage is a lot like choosing a doctor or lawyer — you wouldn’t put your life or liberty in the hands of someone you didn’t trust, and the same goes for your hard-earned money (and arguably, your future).
Spiking shares a few thoughts with you on selecting a stockbroker if you don’t already have one. You might also (as it is possible to have trading accounts with more than one broker) want to have an additional brokerage or two to help you with certain transactions you have planned.
Full-service vs Discount Stockbroker
First, let’s review the difference between a full-service and a discount stockbroker or brokerage. Discount brokers are often referred to with “online” after a slash or in parentheses, but since many full-service brokers offer online services as well, we’ll stick to plain ol’ “discount” in our discussion.
A full-service broker can give you advice as to which shares to buy, and should be there to explain things if a transaction should get complicated. It goes without saying that a full-service broker comes with full-service fees.
Discount brokerages do just what their name suggests, but as with most other purchases in life, you get what you pay for — the broker will only place your orders online, but in terms of guidance, you’re pretty much on your own. There are investors who actually prefer this because they would rather do their own stock market research and be more “hands-on” when investing.
Brokerages in Singapore generally offer options for both full service and D.I.Y. investing, so your choice will then ultimately boil down to which service to avail of after you choose your stockbroker.
What should I look at when choosing a stockbroker?
The Securities Investors Association (Singapore) or SIAS reminds investors that whichever kind of stockbroker you choose, you would do well to make sure that the brokerage is registered and in good standing. All you need to do that is a quick trip to the Monetary Authority of Singapore (MAS) website.
- Trading charges or brokerage fee
- Minimum balance requirement
- Types of accounts offered (whether it’s a Margin or Cash Upfront account)
- How many markets are offered
- Modes of transaction (whether it’s by phone, online or mobile app-based)
- Reputation and reliability
- Custody of holdings (whether your holdings will be in your CDP or custodian account)
- CPF Investment Scheme or Supplementary Retirement Scheme support
- Monthly investment plans
- Options for withdrawing your funds (whether it’s by cheque or direct transfer or deposit)
While promotions and offers aren’t exactly strict necessities for a broker to have, they can be the deciding factor that tips the balance in a broker’s favour. Examples of these offers might be waived commissions for the first few trades, or low commissions for certain kinds of accounts.
Brokerages in Singapore more or less have the same trading charges, except for Standard Chartered Bank which doesn’t charge a minimum trading fee or a custody fee. WeInvest.net notes the significance of having no minimum fee, particularly when compared to other brokerages which charge about 0.25% for trades of less than SGD50,000 each.
What qualities should a stockbroker have?
We’ve mentioned trust as a factor affecting one’s choice of a stockbroker, so it might be reassuring to choose a brokerage with a popular bank’s name attached to it. Many brokerages in Singapore have been joining forces lately, resulting in most of them becoming owned by banks.
But on top of being trustworthy, SIAS also suggests that you try to see if the stockbroker you’re considering
- is easy to talk to, and makes you feel comfortable with sharing details such as your financial situation
- doesn’t pressure you into making investment decisions that may not suit you, just because their other clients are
- listens to, understands and acts on what you say, so that you don’t have to explain your aversion to certain stocks, for instance, more than once
- is patient enough to explain things in detail and as often as necessary — Investing can get complicated at times, and you have a right to know exactly what is happening to your investment.
Stockbrokers for special needs
When choosing a stockbroker, it’s a good idea to consider your investing style as well as the size and kinds of transactions you usually make or plan to carry out. If you plan on investing in overseas stocks (which Spiking has discussed in a previous post), for instance, look into the international investment capabilities of the brokerage that you have in mind.
The International Investor points out that if local listings of overseas stocks are all that a broker can offer you, it might be time to start looking for a better broker. The same advice goes for brokerages that charge substantially higher commissions for buying overseas stocks. This is because today’s trading tech makes it possible for brokers to charge about the same commission that they usually do for buying local shares.
Online Stockbrokers and Spiking
Very simply, a good stockbroker ought to have online services that are user-friendly and have good functionality. Online opinions abound on which broker’s online services are best, but the bottom line is that brokerages do recognise their need to go digital, particularly in order to serve the growing number of young investors (which Spiking has tackled in a previous post).
With its real-time updates on every stock spiking on the Singapore Exchange, as well as the trading activities of more than 8,000 sophisticated SGX investors, Spiking becomes an invaluable complement to online brokerage services. To find out how Spiking can support online stockbrokers and their clients, visit the Spiking app homepage now.