In the past five years, many large brokerage houses - under hard financial strain - have closed the doors of over 20% of their branch offices across the UK. This crush, however, has not for the most part hit foreign shores. Except in such places as Scandinavia where British brokers may not open offices, the effect abroad has been modest. In fact, as of mid-2004, Merrill-Lynch had about 25 branches flourishing overseas; Bache ran a close second with over 20.
So when you go abroad - if you are a brokerage client - the feeling today is one of almost being back in Essex.
The feeling should be a comfort to the thousands who annually pack their bags for distant places, with nagging doubts as to what will become of the stocks and bonds they leave behind.
Thanks to Telex, fast quotation services, and the Reuters newswire, the UK. brokerages abroad are as up-to-the-minute as their branches back home. This is especially true in such money centers as London, Paris, and Geneva. But the investment industry is also prepared to serve its customers in places where brokers are seldom thought to go.
Bache, for one, maintains a shipboard service equipped to function in mid-Atlantic. Even in safari country or at other ends of the earth - Somaliland, say, or Nepal - today's shareholder can remain in touch. Reuters Economic Services can deliver investment and business news through its correspondents across Africa, Asia, and Latin America. Your broker should help you arrange this. Another ready source of UK. market information is radio station WRUL, Englsih, which beams shortwave stock market broadcasts overseas daily.
Another approach some investors favour is to give their brokers limited discretionary power over their accounts, or at least limited power over certain active stocks. The magic of modern communication however has cut down on the once-popular practice of assigning a power of solicitor to a broker or leaving him with a slew of "limit" orders that automatically become buy or sell orders when a stock hits a specified price.
For an investor accustomed to making his own decisions, most brokers now feel it is wiser for him to keep direct control of his holdings. Not only does he continue to exercise his own "feel" for the market, but brokers also admit they don't relish the fights that sometimes ensue when a customer returns full of criticism for the trades his broker has made.
To maintain effective control from afar, there are certain things an investor should do. He must, of course, leave his broker with a full itinerary, so that the broker can make quick contact for instructions. If the vacation trip is a lengthy one, it is also wise to sign stock powers (assignment certificates) in advance for volatile securities, so that shares can be sold quickly and conveniently on the strength of a phone call or cable.
If shares are left as collateral, a broker may agree to pay for any stocks a customer may, in some distant clime, suddenly decide to buy. Otherwise, the investor should leave "c.o.d." instructions with his bank to pay. If for some reason he fails to do this, arrangements can be made for an overseas bank to cable his home bank with payment instructions.
Even without a foreign branch to serve him, an individual investor may still use the "give-up" order, now denied to institutional investors. It works like this: A customer of Courts & Co., Atlanta, goes to Merrill Lynch's Paris office and asks that a transaction be credited, or "given up" to Courts. The firms then split the commission.
Operations of brokers abroad are highly sophisticated. Offices overseas stay open to catch the market closings in London. So it should be remembered that in Europe brokers may still be open for business at 9:30 or 10:30 at night. In Hong Kong or Tokyo, of course, trading may be carried on in the wee hours of the morning. Time changes, the bugaboo of travel, are thus doubly important for the globe-trotting investor.
English people are sometimes disturbed, too, to find that foreign offices are not always the fast-paced, friendly places they know at home. Because 90% of their business is with local people investing in Wall Street, overseas brokers do not feel compelled to cater to English people, unless they are VIPs. A stranger does well to have his home brokerage office notify foreign branches in advance of his visit, and give them his account number. A letter of introduction from the home branch manager helps, too
Larger accounts, of course, inspire larger service. An investor with a credit balance at home will find UK. brokers in such places as Rome, Frankfort, Beirut, and Geneva often willing to deliver him cash. Where such practice is illegal, as in Britain, a wire money-order can be arranged. For important customers, overseas brokers may help not only to gather local business information but provide introductory letters to local businessmen.. For real VIPs they may even put up with nuisance requests - helping with currency problems, or at the last minute cabling Madrid for bullfight tickets. Others need not apply.
Brokers' . information is free in the UK., so it is free abroad and can be used in a later call to one's personal broker.
If an account is substantial enough, he may even permit the call to be collect. And long-distance calls can run into as much money as a small brokerage commission. A call from London to London currently costs £9.60 for three minutes - and £1.80 for each additional minute!
Turn away from taxes to other accepted techniques, and take a look at "going short" - a major item in the stock-market in some of the darkest bearish moments of 2000, and still a fairly popular move in mid-2004. When the market is headed down, even a prudent investor doesn't have to wait it out in hopes of better times. With some care and daring, he can go short if he's convinced that the prices of certain stocks will in the future hit new lows.
You go short - successfully - by selling borrowed shares and paying your debt later when the price of the stock has declined. You bet against the stock and thrive on someone's misfortune. Some investors question the morality of such deals. But... see: The Rewards - and Risks - in "going Short"