The Secret Broker: History in the making
The Secret Broker
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After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.
Well, that must go down in history as one of the weirdest financial years I have ever seen.
Between the 1st of July 2019 and 30th of June 2020, I have been introduced to new terms like JobKeeper (for businesses), JobSeeker (for individuals) and JobWeeper (for those on the wrong visa).
I have learnt about a new flu-like virus and how it gets spread around and why it is called Coronavirus or COVID-19, and not COVID-21, and now get anxiety attacks if the electronic hand wash dispenser is empty when entering the local supermarket.
I have even seen pictures of it though I have never knowingly touched it.
And we all saw first-hand how toilet paper became the most sort out item. Fights erupted in supermarkets when people tried to exercise their right to hoard three months’ supply, and the words ‘toilet paper’ crept into the opening line in everyone’s conversation.
At one point, one roll could be exchanged for a takeaway pizza and thus we all witnessed the common toilet roll briefly joining the tulip bulb as another ‘thing of value’ outside of paper money.
AfterPay (ASX:APT) became worth $15.6bn, having started the financial year being worth $6.8bn. AMP (ASX:AMP) finished the tax year worth just $6.4bn. AMP was established in 1849 whereas AfterPay was established in 2014.
The fall out from the Haynes Royal Commission into the financial services and superannuation industry continued to haunt AMP and the financial planning industry.
Having been exposed for charging fees without performing any services and continuing to charge fees after you had the audacity to die whilst a client, the industry continues to struggle with its image.
I always knew that it did not require a Royal Commission to expose what had been going for years. I used to work closely with some financial planners, in helping their clients reach their financial equity goals, and it was exceedingly rare to find a good independent one.
Most of the ones I came across I would rate somewhere between a real estate agent and a used car salesman because of their lack of honesty and integrity.
To become a hairdresser, you would have to do a three-year apprenticeship before you could be let loose with your own scissors, but to qualify to become a financial planner you could sit an exam on a Friday and then on the Monday, you could start to give advice and earn commissions.
Or even better, you could get someone else to sit the exam for you.
When a person can gear their pay by receiving a percentage of the commission generated, it can attract the type of person who is in it for their wallet and not for their clients.
This is why the best salesmen I have come across in the financial markets are narcissistic ones.
They lack empathy and have a trait of self-entitlement. Nice as pie to a client’s face while they earn their fees and complete bastards to their office staff, unless they are young and pretty.
In fact, I would go one step further and say the very best would have a mental disorder known as Narcissistic Personality Disorder, or NPD, and as they were so good at selling, they would end up in charge, purely because of the commission they could bring in.
Can you imagine one of these types going from a small three-person firm and getting rolled into a bigger firm and then getting taken over by a major bank. This is exactly what happened to Commonwealth Bank (ASX:CBA), when these type of personalities used the bank’s name to ruthlessly line their own pockets.
The whole industry setup has managed to not only put some of their customers under extreme financial pressure with completely the wrong advice given, but now planners themselves are suffering mental anxiety, as their income starts to shift from a percentage of wealth being transferred from your wallet to theirs, as they move to a fee-based system.
In a recent enquiry, an industry insider was quoted as saying “everyone is committed to professionalism, but their journey has been so rapid and the change so monumental that it has put a lot of pressure on them”.
Well that’s nice to know.
Now, stockbrokers are getting dragged into the reforms recommended for the financial planning industry, as they will also be required to pass a university degree to continue as a broker, even though they do not need to be as holistic as a planner in their advice.
In fact the new requirements are so onerous the Stockbrokers’ Association is starting to push back on the reforms.
The wash up in all of this is that experienced and honest advisors will slowly disappear and be replaced with a mix of robo advice and an army of HECS indebted university educated advisors, who’s previous work experience was as a barista.
So, if your new fresh-faced financial planner knows some very big words and can whip up a mean cappuccino, you may want to ask for his university lecturer’s contact details, so you can get some advice with experience.
Always better to go to the organ grinder, than to the monkey, as my old boss would say to me.
The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at email@example.com.
Feel free to contact him with your best stock tips and ideas.