Entry No.101e

IT Writers Awards

Hindsight is a wonderful thing, isn't it? I'm writing this column, post-dot.com-"correction" having witnessed the long, make that very long overdue deflation of some hugely bloated hi-tech aspirants who thought they'd make a quick buck, and probably did, but are now facing some grim realities.

But enough about these sad sacks. Just how did our share trading rivals - the discounters and full service players - fare during this volatile period? If you swallowed the spin-doctors' lines everyone made hay while the dot.com's died.

And, no doubt, they probably did given the panic selling that most first-time share traders participated in during last month's hellish ride.

But was this panic selling necessary? Did the trading public have any idea what they were letting themselves in for? But, more to the point, could it have been tempered somewhat by many brokers - both discount and full-service - if they offered some of their magical advice sooner rather than later?

My answers: probably yes to the first; definitely yes for the second; and certainly yes to the third.

Enough has been said in response to the first claim so I won't flog the dead horse. However, the so-called "correction" proved that a large proportion of the country's trading populace has no idea what they're doing. 

They got dragged in by the media hype generated by countless Tom, Dick and Harry dot.com floats, but missed the boat badly when it came to carefully researching the merits of each respective float. Put simply, the punters weren't being educated.

Sure, most of the blame must rest squarely with those naive customers. However, if the trading houses were truly looking after their customers' best interest, as they all constantly claim to do, then why didn't they impart some of that expert advice onto their unknowing charges earlier?

The online discount kings would probably argue that advice isn't their go, and therefore, any correction fall-out was simply a bad case of "buyer beware". Traditional brokers don't have that luxury, but they were quite justified in clamouring to get their hands on any share of the spoils.

Which leads me to the crux of my argument - if customers would do anything to trade shares, why not offer free trades and charge only for advice? 

Given this scenario, I suspect the online discounters would be severely hamstrung. They hate this idea because price is the only revenue stream they have.

Granted, there are plenty of traders who know what they're doing and don't need or wouldn't want to pay for advice. However, there must be hundreds of thousands of customers who would be willing to part with a some of their hard earned to receive some valuable advice in return.

As this month's feature on the plight of traditional brokers highlights (see page 28), customers might be willing to pay for advice but only if the price reflected the service offered. 

The likes of HSBC and Ord Minnett are seriously evaluating their fee structures and delivery mechanisms to make advice not only most cost justifiable for customers, but also more readily accessible.

They don't have much time, but my money is on the traditional brokers in their bid to grab a much bigger piece of the pie with smart, diverse advice at a good price.
Do you want to pay for the privilege of trading shares or is paying for advice a better option? Have your say by emailing your thoughts to cameron.tomes@informa.com.au. J

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