I was born in 1953. To any young person, that was long ago. When I was growing up in the 60’s brokers were highly respected. They were considered astute international business persons with an in-depth knowledge of business. It was a profession of which one could be proud.
I personally have brokered more diamond deals then I can remember. I provided a service in which the buyer, the seller, and I were able to do business and everyone came out of the deal happy. Sometimes I made a lot of money, sometimes a little.
I was respected for being able to find the diamonds my customers needed at the price and terms that would work for them. The sellers respected me because I qualified my customers well and did not ask my vendors to give me their goods unless I felt I had a very good chance of selling their stones for them. As time goes on you develop a reputation for trust, honor and integrity.
Today, I constantly hear the term joker-broker and rarely do I hear suppliers, sellers or gemologists speak of brokers with anything other than disdain. Not only are brokers no longer looked upon with respect, they are now looked upon with disgust!
I cannot speak of other’s experience. I can only tell you of my own. No longer are brokers astute international business persons with an in-depth knowledge of business. Today most brokers I have come in contact with, or have worked with, are nearly clueless of how business actually works.
Brokers do not seem to understand the inherent risks, problems and fears associated with the completion of a commodity deal. I cannot count how many times brokers call me up and tell me they are ‘right’ next to the buyer or seller. Often brokers come to me with buyers and sellers who they do not even know. Yet they claim the buyer or seller is ‘real’. When you ask brokers what due diligence they have completed they usually answer with silence.
How many of you have been put on a conference call with a daisy-chain of brokers? All of them demanding NCND and MFPA’s before they even know your name! The first thing they do is squabble about the commissions and how they will be divided among them. Then one broker, and there is always one, will not agree with what his share will be and will tell the others that he will not put the seller or buyer forward unless he receives a lion’s share.
If you can get past this nonsense and actually get on the phone with the buyer or seller, you find that the brokers insist that they also be included on the call. Now you have a conference call with six brokers who are bringing the buyer and another five or six brokers who are bringing the seller. If they sat silently, it would be okay, but that never happens. What you end up with is the Tower of Babble.
Brokers rely heavily upon an NCND and MFPA. In reality, they are only as good as the amount of money you want to spend to enforce its performance. If the buyer/seller is not honest, you will not be paid. It does not matter that you have an NCND and MFPA. Lots of luck enforcing your NCND or MFPA in Europe or Africa.
Think for a minute. Once the buyer and seller know each other, they can easily cancel the deal momentarily. The buyer or seller can go back later and restart a deal sans the brokers. Even if one of the parties is honest, the other party can come in under a different company name and the honest buyer or seller will not know that it is the same party he was dealing with. In my humble opinion, an NCND and MFPA are useless.
This reminds me of a (almost) true story. There was once a group who got on a plane to Africa. They were going to do a large diamond deal. Among them were five brokers for the seller and four brokers for the buyer. They sat in the economy section. In addition, there were the buyer and seller who sat in the first class section. Of course flying the plane was the pilot and co-pilot. Somewhere over the ocean, the buyer screamed; “The plane is on fire! Everyone put on your parachute and jump for your lives.” All the brokers jumped out of the plane. The buyer and seller did not jump. When the plane landed the pilot came back into the cabin and asked; “Where are all the brokers?” The buyer and seller looked at each other with a wide grin on their faces. Together they answered; “What brokers?”
The truth of the matter is quite simple. If the buyer and or seller want to cut you out, there is little you can do about it. This is why it is very important to establish and develop relationships with buyers and sellers where you build up your reputation as an honest, reliable and serious business person. A very capable broker once told me; “Time will either promote you or expose you.”
Although there are no guarantees, you are less likely to be ripped off by people in which you have developed a relationship. They become invested in you, and you become invested in them. They will want you to succeed and will appreciate your efforts to help them succeed.
You can only develop strong relationships with vendors and customers by investing a lot of time, energy and money into your brokerage business. To think you can succeed sitting at home in front of your laptop without serious effort and expense is naivete You have no choice but to learn how deals fail and why deals succeed. In learning the ‘guts’ of the business and by investing your resources to gain this knowledge and experience, you can thereby gain the respect of your industry players and regain the proper recognition a broker deserves.
Brokers kill more real deals than one can imagine. Many do not know what is needed from the buyer’s side, nor do they understand what the seller needs in order to complete a sale. How can you expect to close deals when you do not understand the dynamics of the buyer/seller? How can you show your professionalism when you do not know how to overcome the risks of loss to the buyer or for the seller. How can you expect to close a deal when you do not understand how to read a manifest or how to determine the viability of the procedures? How can you speak intelligently about a diamond or any other commodity unless you research it thoroughly?
Brokers dream of huge paychecks in the millions. Yet they do not expect or want to invest any money in their business to make this money. Compare what the buyer and seller has had to invest. To reach their level, requires a huge investment in time, energy and money. How much energy, time and money is a broker willing to invest?
If you are new to the business, work and study under a broker who is honest and knowledgeable. Do so even if you have to work without pay. If you do not have the money currently, go get a job and save your money so you have funds to live on while you are learning. Stop bitching about how hard it is and do what it takes to learn your trade.
If you are an experienced diamond broker or other commodities broker, contact potential sellers in their home countries. Make arrangements to meet them in person in their country. Find out what their risks and concerns are and figure out how to remove their risks from the equation. Next, contact potential buyers and arrange to meet them in person. Find out what their risks and concerns are and figure out how to remove their risks from the equation.
When you know how to eliminate the inherent risks in a diamond or other commodity deal, you will understand how to close a deal. Not only that, you will have determined who are the real buyers and sellers. You will understand the needs of both parties and you will know how to make arrangements that will remove all risks and almost guarantee success.
As I have stated in past articles, even when you have done all your due diligence and you have done everything right, it will not guarantee success. You will never know if the diamonds have value until your gemologist views them.
Even if you saw a parcel previously that had great value, that alone will not guarantee that the parcel of diamonds you are going to look at will have the proper value. You also can never guarantee that the buyer and seller will agree on a price. However, when you do every other thing else correctly, the only reason you will fail, is because the buyer and seller cannot agree on price. This means that most deals will succeed.
Honest, professional brokers provide a very valuable service. They deserve our respect. Bad brokers are a pox, and should not be tolerated. If you are a buyer, a seller or a broker and you cannot close diamond deals, it is your own fault. Either invest the time, energy and money to do it properly, or hire a rough diamond gemologist who can show you how.
Louis Pearl G.G.
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