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.

We seem to have a shrinkage problem going on in my old profession, and it appears to be as vicious as a winter swim in the North Sea.

None of what I read surprises me any more, especially in Australia, where the stock exchange is listed on its own exchange, making it the referee and the owner of the ground, at the same time.

In the land of four banks and two supermarkets it is not surprising that you would only have one major exchange who, it seems, have managed to break their very own drawn up rules on disclosing information to the market.

This is what the head honcho at ASIC had to say about this cosy arrangement that the ASX enjoys:

“It has certain privileges, frankly, in the way it has historically evolved and in the way our current regulatory arrangement operate… So it must, in my view, take into account the public interest in all of its decision-making. It cannot look to its own interest.”

So, they have sort of been able to marry themselves, whilst telling all of their worshippers that this kind of thing will not be tolerated.

They say that a fish rots from the head downwards and this is where I am kinda leading you to.

As a profession, being a stockbroker was once held in the same high esteem as your bank manager or local doctor.

When I first started out, I was forever opening accounts on behalf of children whose parents and grandparents had been esteemed clients of our firm for, literally, generations.

Once a child reached a certain age of maturity, their father would induct them into ways of how a wealthy family behaved.

Protecting the family’s wealth was their main objective, so they would start with their family tailor, who would produce the finest handmade suit, so they would fit in while being introduced to their ‘broker’ and his firm.

Normally, they would then be taken on a tour of the firm, before lunch in Mayfair where the partner could hold court.

Paperwork would be produced and signed and then it would appear in my in tray, where I would open up a new account and add any annotations of instructions required.

And so the circle – well, their circle of entitled life – would just continue on.

Grandfather knows best

Apparently, in Australia there are around 32 member firms and just over 8,000 stockbroking and investment advisors holding the fort on what is left to defend.

I myself left the industry when it appeared that you could not be ‘grandfathered’ over 35 years of experience. You had to take and pass exams or you could no longer give advice to your clients.

Seeing as you were only as good as your last order, giving out good and honest advice was how you survived. If you didn’t do this, then you would have no clients left.

After arguing my point of view, it all came to a head for me, when the spotty faced office junior announced that he had passed his exams and could now give advice.

I had six months to go before my timeline expired, so on that day I just quit, as I could see where this was all heading.

It was better to become a client than continue to be a broker and it seems that I was not the only one, as a recent article reckoned most of us in this situation did the same as me.

All of that experience walked out of the door, so the level of advice and knowledge started to disappear and it became a loss-loss for everyone involved. The clients and their advisors.

It’s just the cold, honest

Fast forward to today and most advisors are too young and inexperienced to help you maintain and build your family wealth.

40% of experienced brokers and advisors have done the same as me – just left the industry. This, mixed with a shrinking top 100 shares to trade and invest in, is one of the reasons why it is not going to get any better.

Why go through all the hoops and loops to IPO your company, when you can sell a slice to a private equity firm and therefore avoid market disclosure regulations?

The ASX itself can be ruthless on some of the companies who actually did IPO themselves and then find a few years later their shares are suspended on some technicality.

For me, AVZ is a prime example of a broken model, where their shares have been suspended over a mining lease ownership issue.

Everyone involved now knows the situation, so why can’t their shares now be allowed to trade?

After all, it’s always buyer beware but now AVZ shareholders have A$2.75bn of value trapped in the land of regularity suspension.

As I said earlier, the ASX is both the referee and ground owner. What goes for them doesn’t go for others and this, my fellow readers, is why shrinkage will continue to prevail.

Not even an hour in a hot bath will solve this one.

Just pull the plug.

I did.


The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at [email protected].

Feel free to contact him with your best stock tips and ideas.