How to Open a Share Trading Account

By: Wise-Owl Staff

A study from the ASX showed that over 2.5 million Australian non-investors were very keen to invest but had little knowledge on how to go about it and were confused by the information overload on the internet and in the media.

Investing in shares has historically been a great source to generate income and grow your wealth, but before getting started, you need to make sure that you know what you are getting yourself into. Before you open a share trading account you need to decide if you want to invest in shares and ensure that you understand the risks associated with investing.

Here are a few education articles that may assist you prior to making a decision:

  • What are shares? 
  • What are the risks of investing in shares?

Once you understand the terminology and risks and you have decided to begin your investing journey, it is time to open your share trading account. You have to open a share trading account with a registered broker, who will buy, sell and hold shares on your behalf. This article will address the role of the broker, the different types of brokers available, and briefly outline the process of opening a share trading account.

The Role of the Stock Broker

In Australia it is mandatory for investors to go through a broker to buy or sell shares on the stock market.

A stock broker is a financial agent who buys and sells securities on behalf of their clients. The broker acts as an intermediary between investors and the stock exchange, and charges a ‘brokerage fee’ for this service.

Even though many picture the traditional broker as a person, the term technically refers to the company with the registered license number. Thus the term ‘stock broker’ could refer to a company, a person or even just an online platform.

Full Service or Non-Advisory broker?

Historically stock brokers have always been full service ‘premium’ brokers who called their wealthy clients to execute trades on their behalf. The role of the broker was not just limited to the basic ‘execution service’, but also to provide financial advice on top. However, with the internet came an increasing number of non-advisory, online or discount brokers to the market. Before you open a share trading you need to decide what type of broker is most suitable for you.

Full Service Broker 

A full service broker generally offers comprehensive advice on buying and selling securities, provides research and tailored investment advice. Before executing a trade, the broker may also advise on the soundness of the investment. A full service broker typically charges a higher brokerage fee due to the wide range of services provided, however some broker may charge more competitive rates than others.

The full service broker is traditionally used by investors who enjoy having the ability to talk to someone, have trades executed on their behalf or even have their share portfolio managed by a finance professional.

Non-Advisory or Online Broker

As the name suggests, a non-advisory broker is predominantly used to execute trades and generally does not provide any advice on specific investments. This broker is also called a discount or an online broker.

Usually, non-advisory brokers charge lower fees and clients have to place buy or sell orders themselves. Investors are required to keep an eye on their investments and act when they believe it is appropriate. Most investors who make use of an online broker conduct their own stock research or pay a third party, such as Wise-owl, to provide complimentary research.

58% of Australians Trade Online: Study

A research report released by the ASX showed that 58% of Australian investors chose online brokering facilities, while only 31% of investors chose a full-service broker or advisor. It appears that a growing number of Australians have the desire for self-direction and control over investments.

How to Apply for a Share Trading Account

Before applying for a share trade account, an applicant must ensure that he satisfies all the requirements outlined below:

An applicant must be at least 18 years of age, have an Australian residential and postal address, and – in most cases – also have a valid email address and mobile number. During the application process the applicant has to provide a number of personal details and comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

Application process:

Listed below are the main segments of a share trading application form. However, please note that the steps may vary slightly depending on the broker of your choice:

  1. Applicants are required to decide on the nature of the account:
    • Individual account: Account in your personal name
    • Joint account: Account in the name of you and someone else, e.g. your partner
    • SMSF: If you wish to apply on behalf of your Self-Managed Super Fund
    • Trust: If you wish to trade as a trust. Example: family trusts, trusts for minors, settlement trusts, and charity trust
    • Company: Trade as a company’s director or secretary on behalf of a company.
  2. The applicant is required to provide personal details, residential address, and his Tax File Number (TFN). In this step, the applicant might also be required to disclose his citizenship status, SMSF, or trust details.  Please note that additional documentation may be required for SMSF, Trust, and Company accounts.
  3. In order to open a share trading account, applicants are required to pass the identity check. Most Australian citizens and residents can be verified online, however, some applicants may be required to provide proof of identity manually (online, in person, or by post). If the applicant sends copies, he/she is usually required to get these documents certified by an eligible person (e.g. a justice of the peace, attorney, etc).

    Please note that several documents may be required for identification, however, the broker will usually advise of the requirements during the application process. It usually a requirement to provide a minimum of 100 points of ID. Documentation includes e.g. Australian Drivers Licence, Medicare Card, Australian or Overseas Passport, Australian Birth Certificate
  4. Investors need to nominate a bank account for withdrawals or dividend payments from their share trading account. 
  5. Once the application is approved you need to fund your account by making a transfer from your cash account to your new share trading account. 

Next Steps: Buy and Sell Shares

As soon as your share trading account is approved and fully funded, the next step is to buy shares and start building your portfolio. Here are some articles that may further assist you along the way:

  •  How to buy and sell shares
  • How to build a share trading portfolio
  • Investing in international shares
  • How to invest in the NYSE or NASDAQ

If you have any additional questions please do not hesitate to contact the analyst at Wise-owl on 1300 306 308 or use the live chat on the website.

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