The Risk of Phone Brokering

I used to be involved with a an association called the cashflow club in my university. Basically, the club gathers like-minded people, have discussions, seminars, and etc. We also had this thing called Cashflow 101 nights where we play Robert Kiyosaki’s Cashflow 101 board game.

Anyway, on one of those nights, one of our members, shared a rather interesting story. Below is the story. The story might be altered a little bit, but essentially, they’re the same.

A friend of his (I think) wanted to buy shares of one particular company. The share price was trading around $10. He was about to go on a trip, so he gave a quick call to his stockbroker to place a buy order for that company’s shares.

“Mate, place a buy order of 10,000 dollars for so-and-so company”

He then went on his trip.

When he returned, he was shocked when presented with a bill to pay for the shares. His stockbroker did a huge mistake. Instead of buying $10,000 worth of shares, his stockbroker bought 10,000 shares! He now needs to pay $100,000.

Lucky for him though, the share price moved in his favour shortly after. He managed to settle the payment, sold his shares, and enjoyed a rather ‘satisfying’ profit. Phew! Talk about being lucky.

Just imagine what would have happened if the share price actually moved in an opposite direction. I bet all hell will break loose. Parties blaming each other and threats of legal actions being thrown around.

I guess that’s the risk of phone brokering. I read in a book by Catherine Davey, she said that if you have an online trading platform, always favour that option! Use phone brokering only if it is absolutely necessary, and when you do decide to use phone brokering, jot down the name of the broker you talked to, the time of the call, details of transaction, and etc.

As for me, yes, I only use phone brokering when necessary. By necessary, I mean, when I can’t access my online trading platform or when a swift action needs to be taken. I strive to stick with my online platform to execute orders.

I guess, considering that the stock market is a fast-paced industry, human mistakes are likely to be made. Sometimes, the broker you talked to has different accent than yours, making it a tad harder to communicate.

As for me, to be on the safe side, online platform first, but if that fails, then call the broker.

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