There was a time when investors relied on stockbrokers because they had no time to invest. But now, most people worldwide have moved into using online brokerage accounts. They count on robot advisors and algorithms to trade on the stock exchange. So how are ‘traditional’ stockbrokers doing these days? Are they still relevant here in Malaysia? The following information may help you decide whether you need traditional stockbrokers for your investment.
What roles do stockbrokers play in modern investing?
Since the current investors mostly take robot advisors and algorithms for their investment, the traditional stockbrokers mainly work for corporate and business investors. Both types of investors still rely upon the service since they need experienced stockbrokers. Moreover, big investors wouldn’t want to trade on some automated system but a person to see the trade instead.
The stockbrokers may give beginner traders all the guidance they need. Regardless of the skill, experience, or investment size, any potential investor will benefit significantly from a professional stockbroker’s services.
Where is the competition?
Stock brokers are experiencing an influx of competition in the digital trading space.
The online trading platform is said to disrupt traditional trading accounts. But online trading platforms still need traditional stockbrokers, especially to help them navigate. There was a time when stockbrokers were the only way to start an investment because people who wanted to be an investor needed to open an account with a brokerage house. Stockbrokers worked as both salesmen and counsellors.
However, competition has increased among stockbrokers. Since the registration for every platform has already been simplified by the online trading platform, the appearance of a stockbroker seems not necessary. The potential investors can directly apply to the platform, which also provides growth data of the stock invested. Also, the automation of trading robots and algorithms is considered the easiest and the shortest way with a realistic result. Even in 2021, Malaysian stockbroking companies faced a challenging year as the impact of automation.
Based on this fact, stockbroking firms will need to be more innovative in their services, especially for digitalization and the vast growth of internet access worldwide. Stockbroking companies may need to embrace innovation and digital technologies to support customers, who are more tech-savvy while maintaining dynamic regulations and policies.
How to trade without a stockbroker?
Maybe you are a typical person who doesn’t want to trust your money to a stockbroker. Or maybe, you want to learn about stock trading by experiencing it? Well, here are the steps on how to trade without a stockbroker.
Direct Stock Purchase Plans
The DSP or Direct Stock Purchase enables you to purchase shares directly from the company through a company-appointed transfer agent. This method is the most suitable for smaller investors. However, the main downside of the DSP is the lack of diversification. Investors usually need to work with multiple companies in different sectors, so this method might not be the best option.
Dividend Re-investment Plans
DRIPs or Dividend Re-investment Plans are pretty similar to direct stock plans. You can buy the stock using cash dividends paid by your stock-owning company.
Why might you still need a broker?
You are mistaken if you think the stockbrokers’ era is no longer relevant. Stockbrokers are necessary for individual investors and corporations. Brokers can help investors earn significant returns by helping investors identify viable companies to consider investing in. Stockbrokers will also help you to uncover unique investment opportunities and offer relevant financial advice.
Stockbrokers and financial advisors are still very much relevant in our financial landscape. The Malaysian market is young and growing over time. Navigating it will take time and constant change, much like people. The right broker can help make your financial goals more achievable.