Wednesday, April 17, 2013

Which brokerage firm is the best? What fees do they charge? What do they offer? #AskPEAGAMA

Photo credit: Databank
Below are my responses to an investor's questions about brokerage firms in Ghana. 

"Dear Edem,

My name is James Kofi Bond, a Ghanaian currently living in the US. I came across your blog a couple of days ago and have been reading your articles.

I am writing to you because I have been thinking of investing in some equities on the Ghana Stock Exchange (GSE) and was wondering if you could recommend some brokerage firms back home that cater for an investor resident abroad. In addition, would you be kind enough to share your experiences/reviews using some of the brokerages in Ghana. Are you satisfied with services you receive or have received have you had any major issues? Were there any surprises once you started using their services, or did everything go smoothly as you expected?

Below are guidelines I would like to consider before I make any commitment and I would appreciate it if you could offer your thoughts on each of the guidelines. Feel free to add to the list if I miss anything.

1. What is the name of the firms that you would recommend? Are they full-service brokers or discount brokers?
Ans: I would recommend Databank Brokerage, CAL Brokers and Ecobank Capital simply because I have experience with them and likes what I get from them. And Yes, I they are full-service brokers

2. What documents are required to open an account? Should the documents be notarized?

Ans:   They are basically, your IDs/ passport, two passport-sized pictures (individual). Corporations have a list of items to provided. I'll advice you visit their websites to get a more specific information.

3. What is the minimum amount required to open an account with the firm?
Ans: The minimum amount is dependent on the type of the account you want to open with these brokers. But basically there is no specific amount required if you want to open a GSD account (this account is required of anyone who want to invest in stocks or securities on the GSE). Brokers would make you open this depository account. 

4. What type of account does the firm provide? Margin account or cash account?
Ans: Most of the firms if not all provide Cash accounts. I don’t know of any where securities in your account act as collateral for a line of credit that you take out from the brokerage in order to buy more stocks.

5. What sort of operational online facilities does the firm provide? 
*Can the firm's website be navigated easily and does it run all the time without any technical difficulties? YES,
*Would a client be able to place buy and sell orders online. 
Ans: NO except for i-broker services offered by CAL Brokers. I don’t know if Databank Omni trader service is functional. Check their websites for more about that. Other brokers are advancing to offer these services. 
*What other options are available if I cannot place online orders?
Ans: Place order by going to their offices (advisable) or place by calls or fax.
*Do they offer alternatives like talking to a broker over the phone, or faxing and do those alternatives come with an extra fee? 
Ans: Yes they offer and NO they don't come with extra charges.

6. How often or frequently does the firm update information on their website and particularly, information regarding client portfolio?
Ans: Very Often and they do provide real time updates. Clients cannot access their portfolio online unless they use the online trading platforms offered by some brokers like CAL Brokers, IC securities, Databank, but clients can get statement via emails from time to time or as and when they request it.

7. Fees/Expenses: 
*What fees are involved?
*How much does it cost to place orders? Is that sliding scale based on size of the trade, or a flat rate? Are there separate fees for buy and sell orders.
* What about taxes?
* Also, do they charge account maintenance fees or account closing or transfer fees? 
*Will an inactivity fee be charged if the account remains idle for certain period of time? Do additional services bring with them additional expense?
* Do you have a complete list of charges associated with client accounts?

Ans: As provided by the SEC rules,
 1) Subject to section 4 of the Securities Industry (Amendment) Act, 2000 (Act 590), a levy in respect of investments in securities referred to as a transaction levy shall be charged on each purchase and sale of securities listed on the stock exchange or any other trading system approved under the Law.
(2) The transaction levy shall be paid by the purchaser and seller of securities.
(3) The transaction levy shall be charged on the purchase and sale as follows:
(a) for shares, 0.15% of the total transaction value;
(b) for securities other than shares, 0.15% of the total transaction
value, where the transaction value is less than or equal to ¢500
million; or
(c) for values greater than ¢500 million, the levy shall be 0.05% of
the transaction value; and shall include such other rates as the Commission may from time to time prescribe.
(4) The rates shall be charged to brokers commission and the Ghana Stock Exchange Levy and shall be applied as follows
(a) For Shares 0.05% from the broker’s commission and 0.10% from the Ghana Stock Exchange Levy.
(b) For securities other than shares 0.05% from the broker’s commission and 0.10% from the Ghana Stock Exchange Levy for transaction values up to ¢500 million and for values greater than ¢500 million the 0.05% shall be from the broker’s commission.

8. Who would control decision-making in my account? What are their backgrounds and experience of the firm's brokers?
Ans: You can open discretionary or non-discretionary accounts for some but for most brokers, it’s discretionary, meaning you would control your own decision-making. Moreover, Stock brokers & fund managers are licensed, well-trained to understand the market and manage your accounts.

9. How quickly does the firm process client orders?
Ans: ASAP. Most brokerage firms especially the above mentioned ones process client’s order as soon as the orders come in. However, that does not mean the bid or sales would be made, the market forces, determine that.

10. Do they offer research notes/market research or investment recommendations tailored towards clients needs, or will I receive the same research notes as the broker's other clients receive? Also what type of research does the company provide and what is the quality of the research?
Ans: Databank, CBL and some of brokerage firms provide quarterly researches and but do not provide client tailored research notes unless requested. CAL Brokers ltd provides recommended stocks for investors in their daily market updates. Others also do same on their various platforms.

 11. How does the firm communicate with clients? 
*Will I be able to receive contract notes and account statements? Ans: YES
* How often does the firm provide statements and will they be online or in paper? 
Ans: Monthly or Quarterly or upon request from some brokers. It defers.
*Who do I contact if I have a question or concern regarding my account?
Ans: Speak to their receptionist, they would direct you. (Meanwhile, note: Receptionists are not brokers ...Click to read. )
* What are different ways that I can contact my account representative or his or her manager? Phone? Email?
Ans: Email (preferable) and phone (depending on your relationship with the firm)

12. How does the firm manage a client's uninvested cash? Does the firm offer an interest on uninvested cash that is sitting in the account?
Ans: Differs from Broker to Broker, you should ask them we you want to deal with them

13. Will I be able to wire funds into my account via internet banking? If yes, do they have any banks in the US? 
Ans: Yes. And they do, most if not all have international banks they deal with. You just have to enquire and get the necessary directions.

14. Will my securities be registered in my name, or in the name of the firm? Can you explain the differences between the two and the advantages and disadvantages of the two.
Ans: Your securities would be registered in your name. The advantage is that, you would have the chance to use them for anything, like collateral security to obtain loans, etc. Most of the time when this is so, you have the discretion to sell or buy more at your own time hence there is a higher risk involve since you may not be an expert in the market as the brokers are. In the case where securities are not registered in your name (rear), those securities cannot be used as collateral for obtaining loans etc. You may enjoy the expert services of the brokers when they make the investments/trades on your behave. (Mostly through mutual funds or unit trusts).

15. What kind of protection does the firm offer to customers in case the firm becomes insolvent. 
Ans: The Securities and Exchange Commission and the Ghana Stock Exchange has rules protecting investors in terms of insolvency of the firm.

16. Customer Service: How would you rate the firm's customer service. Is someone readily available to speak with a client?
Ans: Rate: 8 out of 10. Available?: YES but sometimes when clients are a lot, as in the case of Databank, you would have to talk to the receptionist and later join the queue when need be.

These are my answers to questions posed by the investor. I hope they help him in his quest to find a good broker. You may also share your experiences with the market participants in the Ghanaian market. 


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