Oran Hall | Why stockbrokers feed their clients with financial information

Stockbrokers use several media to educate their clients about investing, financial markets and the economy, to empower them to make wise and effectual decisions and to grow their own businesses.

Among the media they use are their websites, podcasts, newsletters, magazines, social media platforms like Facebook and YouTube, radio and letters. They rely heavily on technology, so even the magazines and newsletters, as well as investor forums, are online. Considering the high concentration of cell phones and computers in the country, the brokers are able to reach their clients easily and conveniently.

There is wisdom in keeping their clients informed and educating them on the local and global economies, the financial markets, investment instruments and strategies, the performance of listed companies, new offers of securities, and the performance of their own portfolios.

These various media help stockbrokers and clients to engage with each other and allow investors to get a better understanding of the market so they can have more productive dialogue with their brokers and a greater level of independence in making decisions about their portfolio.

Some of these interactions allow investors to hear directly from the stockbrokers, notably their in-house specialists, experts on the economy, policymakers, company executives and directors, financial analysts, and the people who manage their money. There are also opportunities to get direct answers to their specific questions.

The type of information provided is not specific to any particular medium. Thus, investors are able to see what is happening in the market and economy through different lenses.

The market updates the stockbrokers provide often give prominence to what is happening in the various markets. For example, they provide information on the equities market generally but, more specifically, they also provide information on individual companies, with news on developments that are likely to affect them positively or negatively.

The brokers offer to investors and potential investors detailed analyses of the listed companies, drawing on the expertise residing in their research departments. The analysts take a deep look into individual companies, focusing on the current balance sheet and the income statement but also on previous ones, to determine trends, price history, and industry trends and how they are likely to affect the listed company. They sometimes end by making a recommendation, that is, buy, hold or sell.

The brokers also share their research on market trends, showing the current and past states of the various markets and giving their views of where they can be expected to go in the future. Of course, analysts do not all necessarily come to the same conclusion on the same set of facts, so it is best to consider carefully what different analysts say on the same subject before committing to a decision.

Since the financial markets operate within the domestic and wider global economies, it is imperative to understand their current state and where they are likely to go. Inflation, interest rates, exchange rates, and government policies, for example, can affect markets significantly.

A change in one which affects one market positively can affect another market negatively. For example, higher interest rates generally make fixed-interest bonds more attractive, although people holding such bonds before the rate change generally see their values fall. At the same time, equities become less attractive when bond yields increase. Such information and insights can help investors position their portfolios better.

Investors also benefit from the brokers sharing investing strategies with them. They may learn about alternatives to the traditional investment classes and how to use the various instruments more nimbly to manage their portfolios and derive more satisfying returns.

The fact that it is the marketing departments of the stockbrokerages that are generally responsible for these outreach and educational efforts says loudly that growing business is a major goal of these programmes, that is, getting new business and retaining current clients.

The enlightened self-interest of the brokerage community apart, these efforts present opportunities to investors and prospective investors to become more knowledgeable about how to invest successfully. Of course, success is not to be expected to come overnight, but the lessons learned can potentially put investors on solid ground in taking on more responsibility for their financial well-being.

As valuable as these outreach efforts are, serious investors may want to see and taste of what several companies are offering instead of being wedded to a specific stockbroker. The opportunity to see through a different set of lenses can potentially lead to a serious change in how investors approach the management of their portfolios – with more rewarding results. And the real big bonus is that the brokers save them significant research time.

Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.finviser.jm@gmail.com