The Pros and Cons of Direct Share Sale vs. Using a Broker on the ASX

When it comes to buying or selling shares on the Australian Securities Exchange (ASX), investors have two primary options: selling shares directly or using a broker. 

Both methods offer unique advantages and drawbacks, depending on the investor’s needs, experience, and investment goals. Here’s a breakdown of the pros and cons of each approach.

Pros of using Direct Share Sale

The most significant advantage of direct share sales is the absence of broker fees. When selling shares directly, investors only pay the transaction costs associated with the exchange, which can save money, particularly for small investors or those making infrequent trades.

Another advantage direct share sale provides is the level of control over the sale. Direct transactions allow investors to have full control over the sale process. They can choose when and at what price to sell, giving them more flexibility to respond to market conditions.

To use one example, selling shares with Share Sales Direct allows them to sell a broker’s shares on the market as soon as possible, and for the best price.

Once the trade has been executed, the settlement of the sale occurs as well as the legal transfer of ownership. The proceeds of the sale can be transferred as a direct deposit to a nominated bank account within a couple of business days.

Direct sales also tend to be more private, as there’s no intermediary involved. For investors who prefer to keep their trading activities discreet, this can be a major benefit.

Cons of using Direct Share Sale

The primary limitation of a direct sale is the access to a smaller pool of potential buyers. Without a broker, the investor may struggle to reach the broader market, potentially resulting in a slower or less profitable sale.

A Lack of Expertise may also impact your use of a direct share sale. Selling shares without professional guidance means you might miss out on strategic advice or up-to-date market insights. Investors may also face challenges in managing complex transactions, such as short selling or options trading, without expert help.

1. Increased Risk: A direct sale requires the investor to be fully responsible for the trade execution, which can lead to costly mistakes if market conditions change rapidly or the sale is mispriced.

Pros of Using a Stock Broker

Brokers provide valuable market insights and strategic advice, helping investors make more informed decisions. This is particularly useful for those new to the ASX or those who prefer professional assistance in managing their portfolios.

Brokers also have connections to larger pools of buyers and sellers, which can result in a quicker sale and possibly at a more favourable price due to increased competition.

Using a broker simplifies the process, as they handle all aspects of the transaction, from pricing to execution. This reduces the time and effort required to manage investments, especially for those with busy schedules.

Cons of Using a Stock Broker

Brokers charge fees for their services, which can range from fixed commissions to percentage-based charges. These fees can significantly eat into profits, especially for smaller investors.

When using a broker, investors give up some level of control over the timing and execution of their trades. Brokers may act based on their assessment of market conditions, which could differ from the investor’s preferences.

Brokers may be incentivised to steer clients toward certain investments that benefit them or their firm, rather than what might be best for the client.

Both direct share sales and using a broker have their benefits and drawbacks. Direct sales offer lower costs and more control but come with the trade-off of less expertise and access to a smaller market. Using a broker provides convenience, market access, and expert advice, but it comes at a higher cost and with less control. The right choice depends on your individual preferences, investment strategy, and level of experience.