Wealth comes to those with time, patience and wealth

DESPITE being a full-service broker, we still get phone calls that start with the question, what commission rates do you charge?

DESPITE being a full-service broker, we still get phone calls that start with the question, what commission rates do you charge?

When online broking was a new phenomenon in the late 1990s, this question threatened to kill our industry because we couldn't compete on price. Still can't.

It became a bit of a sad old game, broking. It's no fun being compared with a computer with no service offering beyond price and execution, and ultimately, any broker that couldn't deliver any value beyond the execution function inevitably went the way of the Lord.

Of course, it was bound to happen the elitist monopoly of trading on the sharemarket had done well to last so long, but it's not as though its beneficiaries didn't go out with a bang. Every ASX member, some of whom saw membership of the ASX as a potential liability, were given 166,000 ASX shares for every seat on the stock exchange they held, and yes, some held more than one.

So when the ASX listed on October 14, 1998, at $3.97, some of the previously dispassionate members were gobsmacked to work out they had just been handed $659,020 and they weren't even escrowed they could sell immediately, and many did. On the first day, 6.5 million shares traded, as potentially 40 members' worth of shares were sold. In that first selling frenzy, the ASX hit the lowest price at which it ever traded, $3.88 on day one.

The folly. From there, it just went up. Two months later, on Christmas Day, it had more than doubled to $8.48. Now each member's shares were worth $1.408 million and anyone who had sold had to spend Christmas explaining to their spouse the $10,000 a day their decision to sell had cost them. A year later, the shares were worth $1.89 million, and so it went on until the stock hit $61 on January 2, 2008.

At that price, including dividends, membership of the stock exchange had turned into $11.29 million. That was the peak. As of the time of writing, 166,000 ASX shares are worth "just" $4.477 million. Add on the millions in dividends paid out since listing which amounted to $295,314 last year alone and the tally comes to $7.12 million.

So while most people have an impression that all stockbrokers are "rich", the reality is that only some are and not because investment markets are so lucrative.

They are mostly rich because in 1998, the value of 137 years' worth of building an asset called "the stock exchange" an asset that had passed from one member to the other, often for no consideration was crystallised and distributed to whoever happened to be a member at that moment in time.

Of course, the lesson from all this is not about stockbrokers but that only those rich enough not to care about $659,020 on day one of the ASX listing truly reaped the benefits of the ASX investment ride, and, in fact, any investment ride.

The rich get richer not because they are smarter but because they have their school fees paid off, their mortgage paid off and their retirement paid off. Rich people don't need the money, and because of that, only they can afford the things so few people have but need to be successful: money, time, patience.

And that's the catch with the sharemarket. It's much more suited to the rich because success is inversely proportional to how much money, time and patience you have, which, by definition, if you're poor is not enough. Bummer.

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