Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, March 21, 1994 TAG: 9403220031
SECTION: MONEY PAGE: E-6 EDITION: METRO
SOURCE: By Mag Poff staff writer
DATELINE: LENGTH: Long
The discount brokerage service at First Union National Bank of Virginia will charge you $45 for buying a lot of 100 shares of a stock selling for $50 a share. Three other regional brokers all ranged in the vicinity of $100 for a commission.
These brokers say, however, that their services are worth the extra cost, whether or not you need their help in selecting a stock with either high dividends or a potential for price appreciation.
J. Tyler Pugh, senior vice president and branch manager at the Roanoke office of Wheat First Securities, said a broker working directly with a customer can occasionally time a purchase to obtain a better rate.
That may not make much difference on 100 shares, he said, but saving an eighth of a point on buying 1,000 shares shaves $112 off the price of the stock itself.
In addition to advice on buying and selling specific stocks, Pugh said, a broker can help clients structure an entire investment portfolio.
Wheat First Securities would charge a commission of $103 to trade 100 shares of our hypothetical $50-a-share stock.
A.G. Edwards & Sons charges $100 for the same trade, but Vice President Richard Wertz said the company provides some leeway for regular customers who trade often. "People who trade with me - if you buy in quantities, we'll give you a break on it.'
As for what the clients receive for this money, Wertz said "you get me....You've got a relationship more than anything."
Wertz, who has been in the business for 25 years, said brokers at his office do more than execute a trade when an order is given. He tries to buy at a cheaper price and sell at a higher price.
The most important thing for an investor to look at is the investment itself and how well it does for you, Wertz said. It does not help to save a half of a percentage point in commissions, he said, if a $50 stock sinks to $10.
Wertz said a broker knows his customers' financial goals and their thinking in buying a specific stock. And the customer knows the broker's investment philosophy. Wertz has dealt with many of his clients for 15 or 20 years.
People pay fees for other professional services, he pointed out. He himself might buy automobile insurance out of a magazine instead of dealing with a commissioned salesman, he pointed out, "but I don't." He would rather have the advice.
At J.C. Bradford & Co., the commission on the identical trade would be $101.12.
But, Peter Milward, manager of the firm's Roanoke office, said customers get the services of "the best trained, most proficient and most knowledgeable" brokers who adhere to the industry's highest standards of ethics.
The broker does more than take orders, Milward said. He or she explains the risks involved in each type of investment - the things that advertising might not tell you about the latest hot product.
A broker also keeps tabs on a client's portfolio, Milward said. He knows a particular stock is there and will keep the customer informed about developments in the company as long as the customer owns the shares.
J.C. Bradford & Co. once took a survey of its clients to identify the reasons they continue to do business with the firm. Milward said the study found that 75 percent of the clients placed the greatest value on a relationship with the broker servicing their accounts.
Michael T. Morrissett, vice president and regional manager of trust and investment sales for First Union Brokerage Services in Roanoke, said his company conducts all equity (or stock) trades at a discount. Thus, the customer would pay only $45 for the 100-share sale at $50.
The prospectus prepared by a mutual-fund company, on the other hand, dictates the price and terms of buying into that fund, Morrissett said. First Union sells some with a so-called front-end load or sales commission, but it also deals in no-load funds.
Bonds, he said, are sold at "competitive bond pricing," which is about the same as at a full service brokerage house.
As a discount brokerage, he said, First Union executes customer orders but does not give advice. That many change in the near future.
He called First Union a "classic discounter" offering much smaller fees but no investment counseling. Nor do its brokers call clients or prospective customers to sell services and make recommendations.
That means customers must do their own research and know what they want when they call First Union.
Services, on the other hand, are the same as at full-service houses. That includes such products as margin accounts for people who want to speculate by borrowing to bet on future trends of stocks. First Union offers trust services and investment management accounts.
First Union sells mutual funds through investment counselors, each serving five or six branches. They visit each office three or four days a week.
Most mutual-fund sales are made face-to-face with customers in branches, Morrissett said.
Because the counselors are trained in all trust and investment products, Morrissett said, they are in a position to advise customers about different kinds of products to meet individual needs.
Memo: ***CORRECTION***