STOCKBROKER OR NOT? HERE ARE THE FACTS
THE FIRMS WE COVER
come in two types: registered stockbrokers and registered financial services providers (FSPs) that offer stockbrokinglike services,
Registered stockbrokers tend to be older firms focused on personal relationships with clients, while FSPs tend to be online- and execution-only, and focused on derivatives such as contracts for difference.
Only registered stockbrokers are allowed to call themselves “stockbrokers” in terms of legislation, though it has become common usage to refer to everyone who supplies stockbroking-like services as stockbrokers.
There is more to it than the name though: clients of registered stockbrokers hold their securities in their own name in an account directly with the JSE. FSPs tend to provide their services using third parties and hold client assets in a segregated entity that has an account with the JSE.
The difference between the two is negligible to most clients. FSPs tend to be cheaper because they avoid a lot of the costs that come with being a registered stockbroker, such as maintaining multiple JSE accounts. Their clients do face somewhat more risk in that their assets are technically in the name of their broker rather than in their own name with the JSE. So, if the firm were to hit the skids, it could be difficult to extract client assets from the mess.
A registered stockbroker is also much more able to manage issues such as corporate actions and voting on company resolutions. But for most retail clients, that is not important.
As in previous years, there have been calls for us to exclude FSPs from this survey and restrict it only to registered stockbrokers. We have not done this, because our priority is to provide a useful service to members of the public, for whom the difference is often irrelevant. Also, the worldwide trend is for stockbrokers to become more universal wealth services providers in which the actual stockbroking activity is a shrinking component.
We recognise that not having a JSE licence does enable such firms to offer cheaper services, but not some of the more complex share ownership rights that larger investors might demand. Members of the public should be aware of that when choosing their brokers.
We note in the descriptions of each broker when they are registered only as an FSP.