The Blog: What is a Constant Broker?

constant

• adjective 1 occurring continuously. 2 remaining the same. 3 faithful and dependable.

— ORIGIN Old French, from Latin constare ‘stand firm’.

To be a constant broker is to be trustworthy and resolute. A good financial adviser invests millions of dollars a year on behalf of his clients and his clients families. That is a daunting responsibility. It is also a great honour.

To repay that trust, I endeavour to put together the best portfolios available. I have almost unrestricted access to the global equity and bond markets. If I am to work on the premise that I must offer my client's 'best advice' at all times, then I cannot accept any commissions on funds. I cannot invest in assets that are not daily or (at worst) weekly traded.

Too often I see clients stuck in monthly or even quarterly valued funds that have a 6% exit fee to cover commissions. These kind of funds have so many charges attached that future profits are nigh on impossible to achieve.

For this reason, I only purchase daily traded, non commission bearing assets but charge a 1% fee on portfolio value.

For this my clients have direct access to worldwide stock, ETF's and mutuals from institutions such as JP Morgan Fleming, HSBC, Fidelity, Goldman Sachs etc. Part of the attraction of offshore investment is to be able to have almost unrestricted access to global assets on international markets.

From my point of view, it's a little like a chef being able to buy any ingredients that he likes in order to be able to cook a great meal. Unfortunately, in my business, most other 'chefs' choose to cook with a more limited choice of ingredients of lesser quality and then pocket the change.

Many investors go ahead with an offshore plan without even a basic understanding of their tax position on return home. There is no point ever doing an offshore plan if you do not understand the tax ramifications of landing the gains.

But neither do the majority of advisers in my industry. Very few were formally trained in the UK or their home country. They have learned the job from somebody who also learned at a Tokyo brokerage. You cannot understand the gravity of investing client money unless you were trained in a regulated environment with inbuilt checks and balances.

So how does a potential client whittle the wheat from the chaff?

Its not that difficult. Firstly ask questions. Ask him/her as to why they are recommending particular investments and what the pro's and cons are for each.

Ask them about taxes. Ask them about the effect of the charges within the investment programme and if they take commission for buying funds for lump sum portfolios. Then ask them to put all of that into writing. If the adviser agrees willingly, take the next meeting. If he baulks, reconsider.

There is a myth that purports that the biggest investment that you'll ever make is your home. If you are 35 and you retire at 60 and live till 85, you have 25 years to earn enough money to live for another 25 years without working. Not only do you face those odds but you also have to fight inflation eroding your investments at a probable average of 3%pa for the next 50 years.

That is why you need a Constant Broker.