ALISTAIR WARREN | Trade for Good

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If you have one ten-bagger in your lifetime you've done well. Alistair Warren from Trade for Good
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How can you directly support your favorite charity and trade shares at the same time? In this episode we speak with Alistair Warren co-founder of Trade for Good, Australia's first ever share trading platform dedicated to raising money for worthy causes. Trade for Good is an online trading platform that believes doing good is more important than just making a profit.

They donate 50% (after fees) of the brokerage on all trades to their charitable partners, and you get to choose where the good goes!

I thought this is a good way of potentially making something that is a bit of a legacy, something that can give charities consistent return. That's what all the charities strive for and struggle with, is having a consistent level of donation or revenue, which allows them to, you know, plan and grow and implement, you know, strategies to their specific philanthropic needs.

Go this link to for all the charities supported by Trade for Good, and here's links to their socials

Linkedin @tradeforgoodau(look for the G. icon)

Twitter @tradeforgoodau


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QAV Tony Kynaston taking the stress out of share investing


Chloe (1s):

Shares For Beginners Phil, Muscatello and Finpods are authorized reps of MoneySherpa. The information in this podcast is general in nature and doesn't take into account your personal situation.

Al (12s):

The biggest mistake people make, and this goes back to technology and Facebook, et cetera, is thinking every trade they're gonna go in is gonna be a 10 bagger. Now I'm on a couple of these share trading groups on Facebook, et cetera, and everyone just bangs on about 10 bagger. Oh, where's my next 10 bagger? Well, reality is, if you've got one 10 bagger in your lifetime, I think you've done well. If I invest in a stock and I could beat bank interests, then I think I've done well. you know, you put your money in the bank at the moment, you can say four or 4.7%. Well, if you can get a 10% return outta your out of the stock you invested in, then you're, you know, five and a bit, 6% better off. So I think that's what you should be looking for, and not just these 10 baggers and these stories of these people who are lucky enough.

Al (59s):

and it is luck that they've invested in something and it's gone through the roof

Phil (1m 3s):

G'day. And welcome back to Shares for Beginners. I'm Phil Muscatello. How can you directly support your favorite charity and trade Shares at the same time? Today we're looking at Australia's first ever share trading platform dedicated to raising money for worthy causes. Good day Alistair,

Al (1m 19s):

G'day Phil. And thank you for having me.

Phil (1m 22s):

Thanks for coming on. Can I call you Al? I noticed ly you brought you say you name Al everywhere. So Al Alistair Warren has had a professional career in finance and stockbroking for over 30 years. He spent much of that time at some of Australia's leading stockbroking firms, including Macintosh Securities and Merrill Lynch in senior management roles. And of course, now you've started your own business. How's that going?

Al (1m 45s):

It's going well. you know, it's been a, we started during Covid, so it's been a tough time to start business. And the market's certainly of late haven't been very helpful for us. But it's a very rewarding business, Phil, when you're dealing with charities and donating money. It's a rewarding end of the month.

Phil (2m 2s):

So talk to us about the difference between broking when you first started to now, obviously there's a huge amount of differences. Yeah. Listeners will know. I love hearing old war stories.

Al (2m 12s):

Oh, I could tell you some. Yeah. So while I started in 1987, as you mentioned, with McIntosh Securities that were probably one of Melbourne Australia's most prominent brokers back then, I came straight outta school, went into stockbroking as a messenger, And, that was, you know, basically running up and down Collins Street all day to the trading floor, doing settlements, you know, taking big baskets of script and getting checks, et cetera. Massive learning curve and such a fun environment. Hardworking, but fun environment. So, I mean, the big difference is clearly technology. you know, as I said back then, you know, when I started you had the trading floor and you had chalkies scribbling prices and doing trades that way.

Al (2m 52s):

you know, the tickets from the trading floor, you had to manually punch into the computer. The settlements, as I said, you know, it was all manual. You had the old, old share certificate and transfer forms, and you had to match the two together and send them off down to the custodians, et cetera. So technology's played a, a massive part in the change in, in the last 36 years for sure.

Phil (3m 13s):

Do you think fundamentally it's any different though? I mean, really, it's still a market, isn't it? Yeah,

Al (3m 18s):

No, a hundred percent. You, you can only buy and sell Shares, you know, one way, right? Buy or sell. I think fundamentally the, the only sort of change, I guess would be speed of trading. you know, now that we're all on computer and it's all computerized, and now you've got algorithms and we're dare say we're moving into AI trading as well, that has changed. you know, it's harder, you know, for, I know a few guys who are professional traders and trading against the machines has made it very, very hard over the years. But fundamentally, you're a hundred percent right. I mean, you buy sells or your Shares sell Shares. Do

Phil (3m 51s):

You think all the changes have been good for investors?

Al (3m 53s):

Yeah, I do actually. I think the internet has certainly opened up a wealth of information to investors and especially, you know, as your podcast is for Beginners, you know, there's a lot of education out there, free education, research, you know, how do I, you know, research a company or how do I, you know, educate myself on buying and selling Shares or investing? So I do, yeah, I think technology has been a good enhancement to the business. It's improved efficiencies, you know, again, back in the eighties, you know, we used to call it you trade on the never, never. So you'd buy Shares and if it went up, you'd pay for 'em if they didn't, or you'd just sell 'em and never pay for 'em. And if they didn't go up, well, you would just send your check whenever you did.

Al (4m 36s):

But of course, then we move from that t plus five settlement, and now we're at t plus two settlement. So, you know, efficiency, it certainly has been good.

Phil (4m 43s):

And of course, I've gotta commend you guys on the education that you provide. I follow you on Twitter and you, you give some really good information about what investors need to know about buying and selling Shares.

Al (4m 55s):

Yeah, that's Ben, that's my business partner. Ben's background. He and I have worked together for a long time prior to starting Trade for Good. and he spent probably the last 15 years supporting retail investors from a technology point of view. you know, how to trade, you know, fundamentals, you know, setting up alerts, et cetera, that sort of stuff. So he's very driven by education, he loves providing that information and that's, you know, we've got a, a balance with our social media and LinkedIn posts between trading education and obviously our charity work. So, you know, what are the charities doing? How does trading benefit them? So, you know, it's a big part of what we do. And as I said, Ben does a terrific job.

Phil (5m 37s):

Yeah, I've gotta commend that. And yeah, trade for Good on Twitter. And it's LinkedIn as well that those posts go, is that the Yeah, we've got

Al (5m 43s):


Phil (5m 43s):

Yeah, yeah,

Al (5m 44s):

That's right. Phil, we've got the full suite. So we do LinkedIn, Twitter, Facebook, and Instagram.

Phil (5m 52s):

I'm always scared about Instagram. I'm, I feel I'm not pretty enough for it.

Al (5m 58s):

Wow. You and I both, my friend.

Phil (6m 1s):

Do you have any sort of information on the kind of investors that come to Trade for Good and Yeah. Is, are there new investors there, do you think? Yeah,

Al (6m 9s):

A hundred percent. you know, I think it's interesting. I mean, without sounding silly and putting it too simply, we can trade with anyone who trade Shares. So that's from experienced retail investors. And we've got a number of professional traders, you know, guys and girls who sit at home and actually that's how they make an income through to new investors. Got sort of the, I don't dunno what we're at two, Melanie and or Gen Zs, you know, who like, certainly like the philanthropic side of what we do. We have a number of financial advisors who trade through us. So that's sort of the wealth managers. We have platforms. We're just integrating to a new platform that's coming out called Advisor Universe.

Al (6m 49s):

We've just been put on net wealths approved panel lists. We have institutional clients like Pitch Partners in Armitage, which is a fund in Melbourne. And interestingly, we've just partnered with a, a long short manager out of Melbourne called Westborn Asset Management, run by a really, really terrific guy called Charlie Burgess. His fund sort of been closed, you know, just sort of managed his own money plus some sophisticated investors money. But he, he was trading through us, loved the philanthropic approach. and he iss actually now gonna turn his fund into more of a philanthropic fund where he will donate a minimum of 1% N T A, which is net tangible assets or the value of the fund every year to a partner charity.

Phil (7m 29s):

That's great. So, if you were to talk to a new Investor, is there something that you would, or one thing that you would have top in mind to, to tell them to be careful of?

Al (7m 39s):

Yeah, well I've actually got three things. Phil. Oh,

Phil (7m 42s):

Are you, I hope that's prepared, right? You've prepared, that's great. No, well,

Al (7m 45s):

You know, I think it's important. you know, I think the one major thing I think is, you know, for new investors is understand the company you want to invest in. you know, understand the fundamentals, the balance sheet, what it does, you know, what it actually does. So get to know the company that you think you're gonna invest in. And I think the biggest mistake people make, and this goes back to you know, technology and Facebook, et cetera, is thinking every trade they're gonna go in is gonna be a 10 bagger. Now I'm on a couple of these share trading groups on Facebook, et cetera, and everyone just bangs on about 10 bagger. Oh, when's my next 10 bagger? Well, reality is if you've got one 10 bagger in your lifetime, I think you've done well.

Al (8m 29s):

If I invest in a stock and I could beat bank interests, then I think I've done well. you know, you put your money in the bank at the moment and you're getting say four or 4.7%. Well, if you can get a 10% return outta your out of the stock you invested in, then you, you know, five, 6% better off. So I think that's what you should be looking for. And not just these 10 baggers and these stories of these people who are lucky enough, and it is luck that they've invested in something and it's gone through the roof.

Phil (8m 59s):

I think it's always interesting that idea of a 10 bagger is it's, if you're not experienced and you see suddenly a stock soaring and skyrocketing, there's a temptation to sell at 10%, 20%, 25%. And most people sell before it even becomes a 10 bagger.

Al (9m 16s):

You're a hundred percent right. Right. It's you're, yes, a hundred percent. It's,

Phil (9m 20s):

Yeah. 'cause you're playing that psychological game as well, aren't

Al (9m 22s):

You? Yeah. Correct. Yeah. I mean, you've gotta have nerves of steel, right? you know, who wouldn't want to take a 10, 20% return, 25% return? you know, I think some of the, the classic ones, obviously the big one was game stock in America, you know, more locally. We had zip, you know, that went from zero to hero and is back at zero basically. Well, not zero, but a long, a lot, lot long way off $11. But, you know, those reality is those people who held it from say, 50 cents to $11 would be none because you just wouldn't, you might buy and sell it through the course of as it rises, but you know, reality is you're not gonna hold it from 50 cents to $11.

Phil (10m 3s):

And the reality is, in the Australian share market dividends pay plays such a huge role in terms of returns, don't they?

Al (10m 10s):

Yeah, a hundred percent. Getting a dividend yield for building your wealth is critically important. It's finding those Stocks and we've got a number of fundamental tools and analysis tools now and our system that allows you to do that. But yet dividends. And also, you know, a good way of doing it as you're building your, your wealth is dividend reinvestment plans. So instead of getting a check for $35 from Telstra, you know, you select D R P, which you do through the share registry, and that'll invest back into the, the, the physical Shares. So you might get an allocation of 15 new Telstra Shares better that, you know, you're gonna get a check for $35 and just waste that. But this allows you to then go, well, okay, well I've got an extra 22, so then it's, you know, it's compounding.

Al (10m 51s):

I think that's a very good way for a new Investor to build a good quality and portfolio.

Phil (10m 56s):

Yep. Rather than dreaming of those 10 baggers.

Al (10m 59s):


Phil (10m 60s):

Once I get on the forum and then start Yeah. Saying, oh, okay. Oh, this is, this is where I'm gonna make my fortune, you know?

Al (11m 7s):

Yes, exactly.

Phil (11m 8s):

Yeah. Right. Yeah. So what inspired you to co-found, I'm I'm saying co-found because you are a co-founder. Oh yeah. What inspired you to co-found Trade for Good?

Al (11m 17s):

Look, I think there's two, two answers to that question. One is, if you think of what we do and we just take brokerage less our execution and clearing costs and, you know, divided by two or donate 50%, and that's a standard model in broking. you know, if I work at Shaw and Partners or I work at Morgan Stanley, you know, I pay the house or the company, you know, probably anywhere from 50 to 70% of what I write. But that model is not usually applied to the self-directed market. So like the CommSec NAB trade, C M C, because there's no advice, so there's no need to pay the house that those percentages. So common model, just applying it to the self-directed market, you know, we don't provide any financial advice, you know, it's what they call non-ad advice, execution only.

Al (12m 5s):

So we provide you with the tools to trade, you make decision when to buy and sell, and that's how you do it. So there's that side of it. And if I'm honest with myself, I think post GFC, you know, I, having been in the industry for 36 years, Now I was pretty disappointed with us as a, as an industry and probably more so Wall Street, to be honest, just through the pure greed. you know, you had big firms over there, and I probably won't mention one, I don't particularly want to get sued, but you know, they were, there's been a, certainly a Hollywood movie made about it. But, you know, you had big firms shorting it, which means you, you sell it at a high price on the hope that you buy it back at a cheaper price. So reverse to a, a standard guest investment strategy, you know, shorting it on their book and, but selling it to their retail clients or their investors, And that I thought, gee, we're a pretty poor industry when we're all about us and it's all about greed.

Al (12m 57s):

So I thought, you know, this is a good way of potentially making something that is a bit of a legacy, something that can give charities consistent return. That's what all the charities strive for and struggle with, is having a consistent level of donation or revenue, which allows them to, you know, plan and grow and implement, you know, strategies to their specific philanthropic needs.

Phil (13m 22s):

So, Al speaking of these charities, which are the ones that you support?

Al (13m 26s):

Yeah, when I started at, I had 30 in Mom and Iron, Phil and I, and I don't want, I dunno why I thought 10 for humans, 10 for animals and, and 10 for the environment. But reality is in Australia, There Is 58,000 registered charities, which grows at about 4% a year. And I think they're the second largest employer behind Hospitality So. It's really,

Phil (13m 48s):

I had no idea about that. Yeah,

Al (13m 50s):

Yeah. No, it's a big industry and you know, I've learned a lot about charities over the last three years. Yeah, it's an interesting space. So we started with that 30, but reality is humans need so much more support, whether that's medical research or whether that's, you know, housing, domestic violence, food, you know, food Bank is one of our big charities and the amount of work that they do with, you know, providing meals, you know, and the amount of need for that is quite staggering. And, and I think that's, you know, it's well publicized on news and, and everywhere that, you know, that's increased through, you know, cost of living pressures. So I think, we'll, if we get to 30, we've currently got 15 or we've got 16, we have Trade for Goods Choice.

Al (14m 34s):

A lot of our institutional clients just say, leave it up to you, you guys sort it out at the end of the month and we just prorata across everybody. But if we got to 30, I think it'd be 20 for humans, five for animals, five for environment. And the reason I sort of wanted that lower number is to make a meaningful difference. you know, we can have 300 charities and send out $10 each for argument's sake. you know, that's not gonna shift the dial much. So I'd rather have a smaller number and make a meaningful difference. So we have charities, some well-known brands, we have Variety Kids, charity that's now called, it used to be Variety Club. We have Rural Aid, habitat for Humanity. And then we've got some lesser ones, which are old food bank, as I mentioned.

Al (15m 15s):

Then we have pet rescue, we have on the animal side, we have a horse, a sanctuary one on the environment side, we have Carbon Positive Australia take three, which is about ocean and education around plastics. And that, they're two really good examples about how you can make a meaningful difference with, with your brokerage. Now Carbon Positive Australia does reforestation and regeneration of our natural bush right across the bottom and up the eastern seaboard, you know, and $4 plants a tree. So, you know, it doesn't take much from one trade to make a meaningful difference. Take three, educates kids, they also collect rubbish, but they educate school children about, you know, the dangers of plastics in the ocean.

Al (15m 58s):

Now they can educate two school children for $9 50. So again, you know, it's an easier way or an easy story to tell when, you know, your brokerage can go to those sort of lower numbers. Food banks creates a meal for 50 cents, you know, so it's easy to make a, a meaningful difference with your trading. Some of the bigger ones like Cancer Research, pan Care, you know, it's research. So that takes a lot of money. Money, but you know, so we have a lot of, a lot of charities. Do you want me to list them off?

Phil (16m 29s):

No, no, it's okay. We'll put 'em in the notes. We'll put a full list in. Yeah. Okay. In the notes

Chloe (16m 32s):

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Phil (16m 52s):

So your brokerage fees are quite reasonable. What, what's the proportion that goes to charity and how much of the brokerage fees?

Al (16m 59s):

Yeah, so institutional rates where price takers, not price givers. So they tell me what we're gonna charge 'em, which is well and good because they do some big lumpy trades. So that's great. They are

Phil (17m 9s):

The, they are the big end of town for, they're in for a reason.

Al (17m 12s):

Correct. Wait, you know, retail rates, we start at $9 45 G SS T inclusive, that's up to $10,000 a trade, 15 to 15. And then it's 0.099% or nine, nine basis points. And basically what we do, I mean, we've got costs, obviously, you know, we have gotta pay our broking partner for the actual trading side of it. We pay the A S X fee. So we subtract that and divided by two, you know,

Phil (17m 39s):

So you could easily plant a tree for one trade.

Al (17m 42s):

Oh, a hundred percent. Mm, a hundred percent. And you know, I lo I love that story and, and I, we've used it again, going back to our social media. you, you know, someone like, you know, picture partners, big firm, you know, a big business consulting accounting firm has a wealth division. They manage about 5 billion. So it's a big firm. But you know, we can legitimately say they offset their carbon footprint by their trading. So, 'cause every time they trade, we go plant a tree. So, you know, it's a good story.

Phil (18m 11s):

So one of the first things an Investor in the share market has to do is open a brokerage account, which is where you guys come in. Talk us through the process.

Al (18m 18s):

Yeah, well there's another thing that's changed a lot over the years. Phil, you know, that used to be so manual wet signatures, you had to send all your paperwork in very, you know, painful.

Phil (18m 29s):

Oh, I, I'm old enough to remember. Yeah,

Al (18m 31s):

Yeah, exactly. And then, you know what, that's still the biggest challenge in our business because, you know, people are inherently don't want to change Now I think statistically, you know, you're more likely to get divorced than change your bank account. But the way we do it is now is a lot better through technology. So it's all online. So you go to the Trade for Good website, www trade for au, get started across the top menu banner. And then you choose your charity, fill in some details, you know, you electronic verification of yourself, you know, if I use a individual personal Investor, retail Investor stick your license in or your passport, it verifies who you are.

Al (19m 12s):

We auto automatically open a Macquarie CMA account and we do that. Well, it doesn't cost you anything, which is a good thing. That's a

Phil (19m 19s):

Cash manage management account, isn't it? Because you're have a cash account a along with a broking account.

Al (19m 24s):

Yeah, and we do that because we, well, two reasons reduces our risk and it also reduces the end investor's risk of fat finger. So we do cash feting. So you know, you must have $5,000 in your account to buy $5,000 worth of stock. You accept some penalties and CS at the end of that. And then we set you up with our desktop version of our trading and our free mobile app, which you can also trade from. And you're sort of up and running within 24 hours.

Phil (19m 51s):

Great. So let's go through it placing an order. What's the difference between a limit order and a market order?

Al (19m 56s):

Yeah, A limit order is, as it sounds, right, you know, you dictate what price you are limited to on your buying or your selling. So you say, I'll only buy BHP at X price, or I'll only sell BHP at X price. A market order is, I just wanna buy it, I just wanna sell it. And it'll go through at whatever the market is at that particular time.

Phil (20m 19s):

Are there any dangers in either one of those approaches? Actually, I'll just tell you a personal story. 'cause I do like what, looking at the depth, the market depth when you place an order. Yep. And you can sort of see, oh, okay, I can kind of see where my order will sit in the market depth. And you might be waiting for a long time for that too. Yeah, yeah. That order to go through. I'm sure you've seen that many a time. Yeah.

Al (20m 40s):

Especially on the sell side, right? You always wanna sell.

Phil (20m 42s):

Yeah. When you wanna go. Yeah, yeah, that's right. Yeah,

Al (20m 44s):

Yeah. No, no, you're a hundred percent right Phil dangers. Look, I guess, you know, again, it comes back to, you know, your personal mindset. you know, dangers are, oh, I'm gonna sell it at market. And then of course it goes up 10% further in the day. And, you're like, God damn, wish I didn't do that. There's no real inherent danger I don't think, other than, you know, missing out on the price that you wanted.

Phil (21m 6s):

So you also provide watch lists. Why are watch lists important? Yeah,

Al (21m 10s):

Watch lists are great, actually within our trading platform, it sort of drives the whole, I guess, functionality of the, of the platform. So you create a watch list. So that allows you to have a one simple space that allows you to monitor the Stocks that you are interested in. It then drives things like charting depth, as you mentioned, and the market information fundamentals. And you know, simply clicking in your watch list on BHP, it then alters the rest of the platform to say, charts will update your fundamentals, your depth, et cetera. So it's a great easy way to have a snapshot of the Stocks you're interested in. From there, you can, you know, right click trade, you know, buy or sell the Stocks that you've got in your watch list. And importantly, you can add alerts.

Al (21m 52s):

Alerts are a fantastic tool, which allows you to say, well, you know, there's a number of different levels of alerts you can set. You can do it on, you know, price. So tell me when BHP hits a certain level or if it goes down a certain level, you know, if the, if the bid price or the offer price hits this price movement. So if a one of my Stocks, if BHP goes up by 10% today, let me know volume, you know, if it's doing X amount of volume or even news, if it comes out with price sensitive news, let me know. So it'll send you a, it'll send you an email or send a direct alert to your phone. So you're always, you know, up to speed with what going on.

Al (22m 33s):

Unless you're gonna sit there and stare at your screen from the hours of, you know, 10 or four or just after four. you know, it's great way

Phil (22m 40s):

Not gonna be your mental health unless you're a professional trader.

Al (22m 43s):

No, correct. Yeah.

Phil (22m 44s):

Yeah. So you mentioned charts. How would you, a beginner begin to approach charts? Because they can be very, very complex, can't they? And they can be

Al (22m 52s):

A hundred percent,

Phil (22m 54s):

And it's really you, you just have no idea about what's going on with a chart when you first look at one. So what, what would be your suggestion for someone looking at a chart for the first time?

Al (23m 4s):

I would ring Ben, he, he's a chartist expert. Look, you know, I'm, I'm a simple line chart, sort of a sort of a guy. I think the candles. So you can see visually when there's selling pressure, you know, the red candles versus the green, which is the buy. I think that's, you know, for, I am a simple chartist Phil to be honest, but you know, they sort of visually tell me that you can see pressure if stock's getting oversold. So obviously the price will come down. But there again, you know, there's lots of good charting information out there. you know, Google's a wonderful machine, AI is fantastic chat, g p T, you know, so there's a lot of wealth of information out there.

Al (23m 44s):

It's again about education.

Phil (23m 45s):

It is. And there's so many different styles of being a chartist as well, isn't there? Oh, yeah. you know, reading candles or reading patterns or looking at momentum or, you know, the, the, the indicators, whether you're a Mac D kind of person or a,

Al (23m 58s):

There's everything, there's

Phil (23m 59s):

So many of them. So yeah, approach it carefully, I would suggest.

Al (24m 3s):

Yes, correct. Because, you know, it is a good tool to, you know, I guess figure out momentum, you know, and certainly goes back to, you know, your, your understanding the business. you know, charting's a good way to go back and look at price history. Mm. you know, what, what's this stock done over the last five years, 10 years, one month, two weeks? you know, does it have seasonal increases or decreases? Mm.

Phil (24m 24s):

I think it's also worthwhile because there's also the trap of catching a falling knife. And I think just, just by looking at a chart for a company over a long period of time, it gives you just bit better idea because people say go, oh, look at it. It's a $5 today. It must be really cheap. But then if you look at it in context of that price action over a period of time, yeah, you can say, well, you know, they can go a lot cheaper as well.

Al (24m 49s):

Yeah, yeah. A hundred percent. A hundred percent. Yeah. Very good tool though. Charting, you know, and as you said, you know, there's people out there who call themselves chartists and they just love a chart, as you said. There's indicators, oh my god, there's hundreds of them moving, crossover averages and blah blah,

Phil (25m 8s):

The golden cross, the death cross, all that sort of stuff. Yeah. And then you get into the candles as well. All the different kinds of candles. Yeah. We'll get back to the show right after this brief message. Why am I buying, holding, or selling a share? If you can't answer that basic question, then you don't have a plan. The best investors are ruthless in executing their plans. I've been fortunate to meet many great investors on the podcast. Tony Kynaston is one of the best. He has a clear and systematic approach to investing that is honest, sensible, and methodical. It's called QAV Quality at value. QAV now offer an excellent light plan for only $29 per month. You can follow their buy and sell recommendations and learn the ropes.

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And the first month is free using the promo code SFB light. Go to qav au to sign up. That's QAV au. Using the promo code SS FB light past performance is not a guarantee of future returns. Please read the QAV FSG and consult a financial professional before investing. I receive a small commission for services I recommend, and I only recommend services I use myself. I'm referring now to a recent tweet that I saw you guys were an ex, I dunno what you're supposed to call it anymore about Oh yeah. Many brokerage services, not charging brokerage anymore, especially in the us Tell us about that. Talk to us about what's going on there.

Al (26m 29s):

Yeah, look, it's interesting. That'll never happen in Australia, I don't think. It's not legal here as it doesn't allow what they do in the US it's called payment for order flow. So, you know, Robinhood is obviously the, the biggest name around doing that sort of thing. So they get paid to put your orders somewhere, usually with a market maker or a another broker. So they get paid and that's how they make money. So they can charge you no brokerage and, and look, Robin Hood's a good example. They don't charge brokerage, but they make a billion dollars out of order flow. So they get paid that way. US is a total different market to us, you know, but purely based on volume as well. you know, I think I read during the pandemic, I think it was TD Ameritrade, one of the big brokers might have been Charles Schwab in one day, pure retail did 7.3 million trades.

Al (27m 18s):

Now our market wouldn't do that totally in, oh god, you know, months, you know, not months. That's over exaggeration a month. So China

Phil (27m 30s):

We're tiny, let's face it. Yeah.

Al (27m 31s):

Oh correct. So they get paid for that. They also do, in the US they have sort of a, a default margin facility. So if I bought $10,000 worth of Shares and didn't pay for it, well it rolls automatically into a margin type facility. So then they start charging you interest. So they make money that way. They make money outta stock loan. So we're talking about shorting before, that's quite a big, big strategy in America and they make quite a lot of money out of that. So yeah, pay for order flow is the main reason. That's why they can charge no brokerage. As I said, I don't that'll ever come in here because that's, you know, it's not, asic don't like it. I think it's, I'm, I'm not a hundred percent sure if it's legal law illegal, but certainly ASIC do not like it.

Al (28m 16s):

So I don't think it'll ever come in here.

Phil (28m 18s):

So it's these market makers just shaving off fractions of a cent on each particular trade over many, many trades, isn't it? That's how it works. Yeah,

Al (28m 27s):

Yeah, yeah, yeah. Correct. you know, they, I mean there's some, some clever, again, comes back to technology, but you know, there's clever things like, you know, they can do pre-match books. So you know, if you're a broker and you are charging brokerage, certainly at an institutional level, you are always trying to find, do a crossing, which is to find a buyer and a seller because you get two legs of brokerage get on the sell side and the buy side. So, you know, if they get all this order flow and put it into their pre-match book, they get more chance of crossing things up and which, which obviously good revenue two sides, but they also put it into their black box sgo, you know, secret sort of technology trading stuff that they, as you said, the shaver point either side and make money outta it.

Phil (29m 12s):

Hmm. Wow. It's fascinating the way it works, isn't it? We, we feel, so it's a little bit old school and old fashioned here in Australia, but it's quite a solid regulatory framework that we operate in, isn't it? A

Al (29m 22s):

Hundred percent. A hundred percent. you know, especially in the region. That's why we attract so much, so many international investors, I guess is because of our regulatory framework. Certainly, especially in the region, you know, we are, we are seen as one of the safest markets to invest in.

Phil (29m 39s):

Do you have any horror stories of full service brokers? There's a, there's a question without notice for you.

Al (29m 44s):

Yeah. Horror stories. Well, I think, I think the biggest failure I guess we've seen in my time has been, well poor old Macintosh did back in the day, as I said, you know, we were probably one of the most predominant brokers in Australia, probably along in Melbourne, certainly with Potter Partners, which obviously became Bell Financial Group. We, at some point, I can't remember, it was when it was, it was in the early nineties, I think one of the corporate guys decided it was a great idea to float the Grand Hyatt and they underwrote it. Which means if you say you're listing a company at $30 million and you underwrite it, you guarantee to the company that you'll pay that $30 million. Now, normally if it's a good placement or an IPO, you know, you spread that risk because you are confident it'll get away and the investors will take it all.

Al (30m 30s):

If there's a small shortfall, say a million dollars, well you've gotta pay it up. Unfortunately they didn't get it away. And, that was a direct result was that Macintosh then had to find a buyer because it couldn't find the $30 million. And that's how Merrill Lynch came to Australia. They came in, bought the whole Macintosh business for a very, very cheap price. And Macintosh was unfortunately gone forever. and it became Merrill Lynch

Phil (30m 54s):

Because brokerage firms aren't, aren't just about buying and selling, they do other things. They get involved in corporate. Okay, yeah, they get involved in things like corporates and IPOs, don't they? Yeah,

Al (31m 4s):

Yeah, definitely. I mean, it's, corporate is a strong, if you are a full service broker like a Bell Potter or a Shaws, you know, that's a strong level of revenue because when you do a listing or a placement or help companies raise money, you can charge bigger fees. you know, And, that usually is somewhere between two to 6% harder Stocks to get away. Probably you might get a little bit more than that. Whereas your average brokerage account, you know, you, you can't charge someone 6% to, you know, buy or sell a share. you know, it's down in the basis points level And that these days. So it's a big, big revenue line for most full service brokers. you know, you have research departments for the bigger institutional brokers, that's another big department, you know, 'cause they're always trying to find the edge on a particular stock.

Al (31m 53s):

And research through the fundamentals, through the, the financials is a good way of doing that. And then of course you go then sell it to your institutional clients. Hey, Phil, a, B, C, big shop financial planner, I've got this, you know, tip on this stock. Not a tip. I've got this fundamental data. Our research suggests this is a great buy. And that's how you sort of drive revenue through those research ideas.

Phil (32m 15s):

So how can listeners find out more about Trade for Good Now?

Al (32m 18s):

Easy Phil easy follow us on all our socials as I said. But the easiest way is au. All our contact details are there. We're always happy to have a chat to anybody can open their information about all their charities, their pricing, et cetera. That's the easiest way. And as I said, we'd love to chat, chat to anyone who wants interested in opening an account or just wants to find out more about some the charities that we support.

Phil (32m 46s):

Okay, well we'll put all of those links in the blog post and the episode notes as well. So Al Warren, thank you very much for joining me today.

Al (32m 53s):

You know, Phil, thank you. We had a couple of false starts with missed planes, et cetera, but thank you so much for having me. It's been an absolute pleasure.

Phil (33m 1s):

Ah, it's always good to get the technical issues out of the way and then have a trouble free interview.

Al (33m 6s):

Thanks mate.

Phil (33m 7s):

Okay mate.

Chloe (33m 8s):

Thanks for listening to Shares For Beginners. You can find more at Shares For Beginners dot com. If you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more about investing for their future.

TONY KYNASTON is a multi-millionaire professional investor thanks to the QAV checklist he developed . Tony's knowledge and calm analysis takes the guesswork out of share market investing.

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