Taking Stock: Concerned About Getting Personal with Your Broker?

Whether you're a first-time investor or a seasoned market player, choosing a stock broker may be the most important financial decision you'll ever make. And to make things more complicated, there's no shortage of options from which to choose: younger or older; male or female; local or interstate."It's just like any other profession -- medicine, law, accounting, you name it. There are a lot of good brokers out there and, unfortunately, there are some bad ones," says Michael Robinson of the NYC-based National Association of Securities Dealers (NASD), a self-regulatory organization that monitors the securities industry and operates the NASDAQ stock-price quotation system.Although all NASD-registered brokers must pass a battery of exams to attain accreditation, Robinson says, more often than not, the issues that determine whether or not a consumer ends up happy with their broker are personal ones. "Do they like the broker? Can they communicate with one another? And, of course, is the broker making them money?" Robinson says.Ah yes, making money. Isn't that what this is all about?"Initially, I think the relationship between an investor and a broker is founded on intuition. The investor asks themselves `Do I trust this person?'" says Tim Ashbridge, a director and senior vice president of Richmond-based investment firm Scott & Stringfellow. "However, what happens is that over time that investor gets a very tangible indication of what the broker is doing for them and how their `bottom line' financial position is being affected."At the outset, though, I don't think there is a formula to determine whether or not you're choosing the right broker," Ashbridge says. "Some people may make decisions based on age or gender, but the ability to communicate and the issue of trust have always got to be at the top of the list."Unfortunately, people don't go around with signs on their neck saying `You can trust me.'" But the State Corporation Commission does offer consumers a way to check up on a broker to whom they're considering turning over money. It's a nationwide computer database called the Central Registration Depository (CRD) and anyone can access it (via the state) at no cost."I'd suggest that anyone who's concerned about a broker, or who would just like to know more about that person's record, should contact our registration division," says Rhea Shelton, chief of registration of the securities division of the State Corporation Commission.Shelton says the CRD makes it possible to determine whether or not a broker, and/or their brokerage, is legally registered in the State of Virginia, what accreditation the broker has, and, perhaps most significantly, provides an accounting of any disciplinary actions that have been levied upon the broker by the NASD, the Securities Exchange Commission, or any state regulatory authorities. In addition, the CRD provides data on any customer complaints filed against the broker or brokerage, as well as any criminal charges. (To find out how to run a CRD check, contact the State Corporation Commission at 371-9686.)"I think the CRD check makes a lot of sense for anyone who has hesitations," says Scott & Stringfellow's Ashbridge. "However, I'd like to think that any brokerage would provide you with the same information on one of their brokers. Another thing to consider is that the CRD doesn't report on a broker's performance; it doesn't show what they've gained for their clients. For that kind of assessment, you're better off sitting down with a broker, explaining what you have, what you're trying to achieve and what your concerns are. If they can't tell you in plain, simple language what they propose to do, I'd suggest you go elsewhere."[Sidebar] Great ExpectationsWhat if your 30-something broker has never seen a bear market?By nearly anyone's account, the last two or three years in the financial markets have been not only bullish, they've been big-angry-bull-with-giant-horns bullish. A lot of people are making money hand over fist, but, as always, question remains: how long will it last?"It has been phenomenal. The last three years have seen returns on investment the likes of which few of us have ever experienced," says F. Willson Craigie, Jr., senior vice president, investments of Wheat First Butcher Singer. "But this is not the kind of environment in which people should continue to expect returns of 20 and 25 and even 30 percent -- and we've been seeing those kind of performances -- without a corresponding degree of risk being attached."Ashbridge agrees. "Right now, a lot of brokers are trying to get clients' expectations back down to a realistic level -- say 9 to 12 percent. Higher returns on individual stocks are very possible, but in the long term it's not realistic. However, after a three-year `party,' people can lose sight of the fact that the party isn't going to last forever."This begs the question, what if a broker has never known a significant downturn in the market? If they've never experienced a bear market and the attendant sell-offs and price drops, how can they effectively manage their clients' portfolios?"There's no question that is an issue that investors need to be aware of. And although I think there's no substitute for experience, it's a mistake to assume that a young broker is necessarily worse than an older one," says Wheat First's Craigie, a 25-year veteran of the company. "There are a lot of very savvy younger brokers out there. There are also some who get caught up in the hype of the marketplace and make mistakes. At Wheat First, we've got ongoing training programs in place to bridge the gap between less experienced brokers and those who've been around a long time."Similarly, Scott & Stringfellow has initiated a mentoring program whereby younger brokers are paired with more experienced ones. Scott MacMillan, who has recently joined the firm, has been paired with 18-year veteran Tim Ashbridge."The mentoring program's been great. There's no pressure to look like I know everything -- there's no way you can," MacMillan says. "The program really seeks to serve our customers because it provides me with direct access to people with a lot of experience, and I can use that on my clients' behalf."

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