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Stock brokers live life in the fast lane   2009-12-29 - Thanh Nien

The power of brokers on the stock market is greater than people imagine, market insiders say  
Thao, a fresh graduate from the Economics University, thinks she is very lucky to make more money than any of her friends by working as a stockbroker.


But her monthly income of VND32 million (US$1,730) is still a pittance compared with what some experienced brokers at her company make, she said.

It’s normal for them to make VND100 million ($5,400), she revealed.

A survey by Thanh Nien confirmed what Thao said: At some brokerages, the average monthly income of brokers is VND150-200 million.

Trung, another Ho Chi Minh City-based broker, said of the clients he is currently handling, six of the largest have a combined trading volume of more than VND100 billion ($5.4 million) a month, equivalent to a commission of VND110 million from the brokerage.

Clients pay a commission of 0.3 percent of which a broker gets 35 percent.

If his clients make a killing, Trung gets a bonus on top.

Despite the potential to earn such large sums, the requirements for stock brokers are not too high. Though they are required to have an official certification from the State Securities Commission, most brokers do not have them.

To become brokers, candidates, mostly graduates from business colleges, need to have just one qualification – the ability to sign up enough clients for the brokerage.

Hien remembered when he was recruited, he was asked to find 10 new investors every month. As a fresher, he had no choice but to convince his friends and relatives to open accounts at the brokerage.

“It’s like an insurance agent looking for clients,” Hien said.

“At first it helps expand the brokerage’s market share. But it’s not a good strategy in the long run because when brokers have no more personal connections to fall back on, there will be no more new clients.

“Besides, many accounts are opened but without any transactions being done.”

A brokerage manager, who wished to be unnamed, said the bar cannot be set too high for new brokers since it would make recruitment difficult. “Brokers will be judged on how well they deal with their clients and find new investors.”

Powerful voice

The power of brokers on the stock market is greater than people imagine, with sometimes investors depending on their brokers and not the other way around.

Truc, another broker based in HCMC, said as the funds for lending and the number of stocks are limited, brokers decide which of their clients would be given loans first to leverage their investment and how much.

“As brokers are responsible for collecting the loans later, most of the time they only offer loans to VIP clients,” she said, noting that so-called VIP investors can trade stocks worth up to VND20 billion with just the guarantee of their brokers.

Hien said sometimes when his brokerage has no more loans to give, he introduces his clients to a broker at a different brokerage. It would be a win-win situation for everyone if the investor makes profits, he said.

Truc said brokers from different securities companies also share information. If she hears from another broker that investors are buying into a certain company, she would disclose the information to her clients.

Most of the time, the investors would follow the trend and drive the stock further up, she said.

But a cautious broker should not manage too many accounts at the same time, she said. “If investors lose money they will simply choose another brokerage or broker.”

The Securities Law stipulates that brokers must not advise their clients on what stocks to buy or sell. But no broker has ever been penalized for violating this provision.

Le Dat Chi of the HCMC University of Economics said brokers rarely understand the market as thoroughly as analysts.

“Investors sometimes care only about profits that they forget to check the information provided by others.”

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