How do I open a stockbroking account in NZ?

[Dirk Mostert]

For those interested in investing in shares or bonds (fixed interest securities) the process is quite simple. You will need to complete an application form (which I can provide via email if needed) and provide two forms of identification. If you already reside in NZ, you only need to provide a copy of your passport/ drivers licence & a certified copy of your NZ bank statement. If still resident overseas, we will require certified copies of your passport, bank statement and also proof of address.

It takes only a few days to process everything and open your account. Settlement takes place on a T+3 basis (Trade day plus 3 working days). If you are not resident in NZ, then you have to have funds in your broker account before you can transact because international transfers can sometimes take a long time to clear.

There are full service brokers like Forsyth Barr (with an internal research team who produce research for clients) and then discount brokers who are "execution only" brokers.

Always ensure that the financial advisor you choose is qualified as an Authorised Financial Adviser under the new regime. You can confirm this at http://www.fma.govt.nz/help-me-compl...dvisers-(afa)/.

As an Investment advisor at Forsyth Barr, I offer a variety of services, from execution only, to the complete management of your portfolio - or you can choose to invest directly into one of our equity or fixed interest funds.

More on our services at www.forsythbarr.co.nz/investing-with-us/

My disclosure document is available at: http://www.forsythbarr.co.nz/about-u.../dirk-mostert/

Happy investing.

[Super_BQ]

With recent news about the NZ gov't partial sale of the state owned assets, there needs to be a lot more information regarding brokerage account fees for those wanting to invest in such companies. I've clicked all over the website and not a single sign of how much it would cost to have an account open.

There is great anticipation on the Might River IPO deal however, todays TV news on Cambell live with PM John Key highlights that Rio Tinto may shut down the aluminium smelter plant near Invercargill (which consumes some 15% of NZ's total power generation). Where would this surplus go and how would it affect the profitability of electricity prices at the wholesale end?

Like in the US, are there any online discount brokerages in NZ that offer ZERO account, maintenance, handling fees, and with a low transaction cost of like $10 per trade? My aunt's broker in NZ uses some quasi level of pricing - ie $20 for the trade + so many cents per share on shares qty 1 - 100 and so many less cents per shares on qtys over 100 or 1000 shares | WAY too confusing (like working out income taxes).

If the NZ gov't wants to make a great IPO success, they better find an easy way for the public to buy & sell into these shares. At the moment, there isn't enough transparency on how the shares will be valued and how they will be moved along in the primary and secondary sharemarket.

[ScottNZ]

Good luck with that. Be prepared to get hosed on brokerage fees. $30 per trade, plus 0.20% for on-line transactions? No thanks.
http://www.directbroking.co.nz/direc.../ourrates.aspx

[Dirk Mostert]

To open an account can be done at no cost, but you will be charged brokerage fees. These fees vary greatly depending on the service that you seek. In NZ the $30 transaction fee is definitely on the low end. (I understand it might be high in relation to other world markets - but NZ doesn't have the numbers to offer it cheaper.) The discount brokers who offer these low rates do not produce any research for their clients - so their service is aimed at the individual who is prepared to do his or her own research.
Full service brokers charge more (up to 1.5%, depending on volumes traded etc. And there are a lot of etcetera’s.) With the higher fees you should also receive regular research and have access to advice on shares from an Authorised Financial Adviser.
Fees are normally volume driven. When I was trading securities in South Africa, my volumes exceeded $1 billion per annum, but the brokerage was only 0.025%. Even if one was charging 1%, it will be tough to replicate that income through trading in NZ.
.

[Super_BQ]

I'm not trying to rain on your posts but the issue about sharemarkets for the NZ public is way too premature. The big TV campaign that the average citizen in NZ can own shares should at the same time disclose the risks involved (where's the fine print on the bottom of the advertisement? - this is required in N. American advertising on any financial investments being advertised). Instead, the public is being coerced to think that buying into such companies is a "good" thing.

Again i'm not trying to pour rain around here. I have a personal bias against financial advisors. Coming from a background in finance, i'm disgusted at so many advisors (professional registered, ones from the street, friends that claim to know finance, etc) that spew knowledge of how to make $ on the stock markets. They dig up information from so call news releases or the stock of the day that the brokerage firm is pushing etc, just enough so they can create enough movement (herd mentality?) when at the end, they're creaming commissions from their clients. The people in NZ don't know any better and when it comes for them to buy into companies like Mighty River, or Genesis Energy, Meridian, etc. the financial information provided isn't enough for the public to become well educated in making a profit. So why not rely on financial advisors to translate what the figures means? Hell, look at professional fund managers in the Kiwi Saver etc, they have a tough enough time making gains let alone giving some hint that investors will make some $.

Lastly, it really doesn't matter if the advice is coming from a qualified, registered, financial advisor or not. The problem is that there's a conflict of interest when you have advisors that make commissions off clients that are driven to make trades. It's a model that Warren Buffet has always been against yet, the public is still so clueless as they keep dumping $ into mutual / managed funds and other ventures that don't benefit the investor's best interest.

I'm sadden to hear countless of people that lost so much $, their whole life retirement savings in the 2008-2010 financial crisis. People that were only few years to retire when the market collapsed, they had no option but to continue to work for years. One person recently I spoke to lost 70% of their asset value in their pension funds and sold out at the peak of the fall in 2010. Hindsight is 20/20 but at the moment, when you're down by 70%, the fear of losing another 10 or 20% is even more heart breaking so it's easy to pull the trigger to sell up.

[Dirk Mostert]

I want to explain that the reason I write and promote myself here is because immigrants (especially investment category immigrants) very often receive poor advice regarding what are acceptable investments from Immigration NZ’s point of view. Too many times have I seen investors being given a stock standard bond portfolio as their investment vehicle. Because the provider is lazy, the investor ends up earning substantially less than he or she should have.

I did come across one of those pushy US brokers myself, trying their utmost to sell me a stock they think will fly. This doesn’t really work in our share market because our trading volumes won’t allow it. You need to live here to grasp the limited size of our market.

What ultimately caused people to lose so much money was finance companies offering high rates (and commissions) to investors and the investors and brokers getting greedy and maybe not fully understanding the risk. The Mom & Pop investors believed they were diversified when in fact all their money was “diversified” within one asset class (term deposit) and within one sector (finance companies). And we know what happened then.

Now that they are running scared (some with your help maybe? ), they decide to leave all their money in the bank. What do you get? One asset class – term deposit and still one sector – banking. So if something happens to the banks – and you only have to look at what happened in Cyprus – we will have the same scenario again.

I do agree with you that it is scandalous that investors were led astray the way they were. And I agree that when you work largely on commission like many of the small independent brokers did (do), the temptation will be there to sell high commission paying products. I do think those products are now few and far between.

With the new legislation that came into effect here in NZ in 2011 - advisers can now be held accountable for the advice they give - and this has already led to at least one adviser being prosecuted for inappropriate advice.

My Disclosure document is available free of charge to anyone who is interested.

Cheers.

Ps. No more raining on my parade.

[Super_BQ]

. The Mom & Pop investors believed they were diversified when in fact all their money was “diversified” within one asset class (term deposit) and within one sector (finance companies). And we know what happened then.

The area of finance & economics is always up to debate. I only have my opinion and it should not be taken as advice, though I do like to poke a few ideas around here and there.

I'm well aware about diversification to lower risks and there's a lack of that when it comes to the NZ investor. Predominantly 1st choice for investment in NZ has been into real estate and it will remain that way for a very long time. Why this obsession? Quite simply because the average NZ resident understands the real estate model (renovations, rental, all things to add value and generate cash flow etc.). But when it comes to picking stocks, well I like to say, "That's a horse of a different colour". It's not like we're trying to sell cars and certainly the financial advisor doesn't have the same approach as a car salesman. The comparison is that a buyer has some idea of a car they like, and the salesman goes to meet the type of car they want (size, it's utility, economy on fuel, etc.). But when you talk finance, terms like EPS, dividend yields, asset liquidity, taxation, in addition to market threats is too mind boggling for the novice investor. By rights, a person investing into the stock market needs a background of economics, finance, & accounting. But a person in the market to buy a new car, well then that's just a matter of preference (most importantly, all relevant information is easily available). In finance terms, the NZ sharemarket is FAR from being 'efficient' or holding a 'strong form' of efficiency. NZ is not a Cypress and i'll get on to that later.

Buffet proclaims that for anyone interested in investing, it is best to stick with investments that they know and familiar with. It just so happens in NZ, people know rental properties and land, which IMO, is not a bad thing. I would rate investment into a rental properties attracts far less risk than to buy into any shares on the NZX. Why? Quite simply the $ they pay for a fixer upper rental property is under their control, they see the $ going in and can physically do the repairs, etc. When it comes to buying shares, all they see is $ going towards a balance sheet and the full discretionary powers are left to the board of directors on that company. When directors make a wrong decision, they get sent off with a golden handshake and the shareholders lose. When a person fixes up a house in the wrong location for sale, and it proved to be a big loss, well the person has 2 options, i) sell for a loss and blame themselves, or ii) wait long enough until inflation creeps up that the house values eventually appreciates. These options (or controls) do not exist in the sharemarket model.

Bank term deposits (although not the safest) would be the least riskiest. Why? Because it involves no work added to get that % return. If you take all your available investments in NZ, you need to factor the added risk for that extra % return. This is why I never bother to look at NZ junk (corporate) bonds because their prescribed rates aren't much more than the bank deposit rates. The same goes with private venture capitalists a la Hanover Finance, S.Cant. Finance, when they were offering 9 or 10% on cash deposits, the major banks at the time were offering around 7 or 8%. What investors didn't realise is what level of risk were they exposed to just to get that extra 1 or 2% return? No one questioned that and certainly it wasn't mentioned about on all those TV advertisements they've made. Now, those bail-outs have become at the cost of NZ tax payers. NZ Mighty River Power could fall into a similar fate where (like Solid Energy : a NZ state own company) any loss in profit will come at the cost of all NZ tax payers.

I also don't find the NZ banking system having risks that Cypress has. In order for bank in NZ to fall in a similar fate, it would mean that the Australian economy would have to collapse in the same way. It may be a different issue if all the major banks in NZ were wholly NZ owned, but instead, by having Australian backed banks in NZ, we've reduced the risk of such an event.

The more relevant question in the area of finance is, what level of diversification is suitable to the NZ investor? Do Kiwis need to have investments into share markets? Does the measuring stick for diversification apply for one living in Canada vs one living in NZ vs one living in China or Zimbabwe? It may be that bank term deposits and rental properties is all that is required in NZ.