What Is The Difference Between Investment Management and Stockbrokers?
The investment services industry can be daunting and ambiguous for individuals who seek a return on their capital. After working hard earning your wealth, it is important to understand the different services offered by professionals and what solutions fit you personally. One of the main questions we get asked here is:”What is the difference between investment management and stockbrokers?”Firstly, let’s discuss what stockbrokers are – we all have a much better, clearer, idea of what they do and who they represent. Stockbrokers are regulated firms that offer financial advice to their clients. A stockbroker buys and sells equities and other securities like bonds, CFDs, Futures and Options on behalf of their clients in return for a fee or commission. A brokerage / stockbroker will receive a fee on each transaction, whether the idea is profitable or not.A brokerage can specialise in any investment niche they wish for example:
FTSE All-Share stocks,
AIM stocks,
European Stocks,
Asian Stocks,
US Stocks
Combinations of the above
Straight equities,
Straight derivative trading (CFDs, Futures & Options)
The main reason why investors choose stockbrokers over any other professional investment service is simply down to control. Due to the nature of a brokerage firm, they can only execute a trade after you instruct them to do so. This means it is impossible for a brokerage to keep buying and selling securities without you knowing – known as churning for commission. This doesn’t however prevent stockbrokers providing you with several new ideas a week and switching your positions to a new idea.However, there are natural flaws with the brokerage industry is that because trading ideas can only be executed after being instructed to list a few flaws;-
you may miss out of good opportunities due to moves in the market,
you may get in a couple of days later because you were busy and not make any money after fees,
you may receive a call to close a position but unable to without your say so.
The above are examples that can happen when investing with brokerage firms, but this is due to the reliance of gaining authorisation from their clients. So if you are ultra busy or travel a lot then you could potentially miss out on opportunities to buy or sell.What are investment managers?Now we understand what stockbrokers / brokerage firms are about, let’s discuss what investment management services can do for individuals.Investment management firms run differently to brokerages. The core aspect to these services is that the professional investment managers use their discretion to make investment decisions. As a client of an investment management firm you will go through a rigorous client on boarding process (just like a brokerage firm) to understand your investment goals, understanding of the services being used, risk profile, angering to the investment mandate and allowing the service to manage your equity portfolio. The sign up with the service may seem long winded but it’s in your best interest to ensure the service is suitable and appropriate for you. In reality, it’s not a long winded process at all. Once you agree to the services offered then you will only be updated on the on-going account data and portfolio reporting in a timely manner. This means no phone calls to disrupt your day-to-day activities and allows the professionals to focus on your portfolio.Investment management firms usually have specific portfolios with a track record, into which you can invest your capital according to you appetite for risk. These portfolios will focus on specific securities, economies, risk and type of investing (income, capital growth or balanced). All of this would be discussed prior or during the application process.Another method used by investment management firms is different strategies implemented by their portfolio managers. These strategies are systematic and go through thorough analysis before investment decisions are made.The fees usually associated with investment management firms can vary from each firm. There are three common types of fees and are usually combined, fees can be;-
Assets Under Management Fee – This is where you pay a percentage of the portfolio per year to the firm, usually an annual fee. E.g) 1% AUM Fee on £1,000,000 is £10,000 per year.
Transaction Fee – This is a fee associated with each transaction made through your portfolio – similar to the brokerage firm’s commission.
Percentage of Profits Fee – This is where any closed profits generated over a set time will be charged to the firm. E.g) 10% PoP Fee – the firm generates you closed profit of £10,000 in one quarter – you will be charged £1,000.
The main benefits provided from investment management firms is that after the service understands your needs and tailors the service around you, it is their job to build a portfolio around you. It is also the job of the investment management firm to adhere to the investment mandate you agreed on, we’ll take about this later, so you understand of the time frame given what you should expect. Another bonus why high-net worth individuals choose investment management services is because they are not hassled by phone calls every other day with a new investment idea.The difference… The main difference between investment management and stockbroking firms is:
Investment Managers offers discretionary services; no regular phone calls about stock ideas.
Stockbrokers give you more control as you can personally filter out ideas you think won’t work.
Investment Managers offer an investment mandate; this is where the investment management service provides a document of what they are offering you in return of managing your portfolio. You will understand what exactly they are targeting over the year, based on what risk, and should they achieve it – then they have fulfilled their service. E.g) the mandate could state that the strategies used and based on 8% volatility (risk), they seek to achieve 14% capital return.
Stockbrokers do not offer an future agreements but look to deliver growth during the time you are with them. They are not bound by their performances like investment managers.
Investment management firms have a track record for all of the strategies and services used, stockbrokers do not.
Which to choose?Both services provide professional approaches to investing in the stock markets. Stockbrokers are chosen over investment managers by people who like to be in control and receive financial advice. Stockbrokers generally do not have a systematic approach to the markets but use selective top-down approaches to select stocks.Investment managers are chosen by investors who want an agreement on their performances over the year and understand the risk up-front. Usually more sophisticated investors that wish to take advantage of the track-record and gain an understanding of the systematic approach used by the investment management firm.Feel free to learn more.DISCLAIMER: The above is not considered financial advice or any endorsement to use any particular service. If you wish to use any of the services mentioned, please seek independent advice.RISK WARNING: Spread betting, CFD, futures and options trading carries a high level of risk to your capital and can result in losses that exceed your initial deposit. They may not be suitable for everyone, so please ensure that you fully understand the risks involved. Past performance of a managed service is not a guide to future performance.
Home Health Care – Alternative to Do Everything by Yourself
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Private Health Care Preferred Over Public Plans
As the economy becomes unstable and an obvious inflation seems forthcoming, it is the wise consumer who considers private health care. With the growing pollution across the globe with the ozone layer fast depleting, consumers are easily exposed to the ultraviolet rays and adverse pollutants in the air or waters. Hence, the immune system of the body is frequently attacked and weakened; without the appropriate healthcare, one’s health can deteriorate very quickly.Public care planAlthough many governments offer some basic health care plans to their citizens, there may not be enough facilities to cater to the large group of the consumers. Public medical facilities are usually crowded every day with public medical providers being overworked and underpaid.There may not be enough qualified and well trained public medical staff to offer the proper health care to the public. Some public care plans only cater to certain categories of society such as the orphans, widows, senior citizens and handicapped. Hence, the poor and unemployed may not get to enjoy the subsidized or free health care; they would need to resort to private care plans for their health which can be quite costly.VarietyWorking consumers are strongly advised to consider private health insurance for themselves although they may be covered by their companies; however, many companies purchase the minimum level of health care for their employees in a cost saving endeavor. The basic of health care plans is usually the preferred insurance plan by companies for their employees which covers annual basic health checks, common colds and influenzas.But there are many areas of health that require to be covered in case one falls seriously ill. Private medical coverage can cover the cost of hospitalization in serious health issues such as operations and long term convalescence. There would be more choices of professional medical care such as specialists and surgeries at the best hospitals with the best medical facilities.Different private insurance offers different scopes of coverage which would be reflected in the premium quantum. A private health care policy can cover any health aspect that is desired by the consumer as long as the insurance provider is willing to undertake it. That coverage would be computed as a viable undertaking by the insurance company which is translated into a feasible premium to the consumer. It is up to the consumer to dictate the terms of health care coverage until a satisfied plan is accepted with an affordable premium.