The Function Of The Broker

2007: I don't know how many times I have this article. The more I read the more I enjoy it because I like the old generation concepts + their philosophy. Vivian Prins is well-known in the diamond circle. He is from a different generation. His generation did business the old-fashioned way. The diamond brokers knew the buyers and sellers. It was not transaction but relationship concept. I wish todays generation are the same. Times have changed. The diamond industry has changed + there has been a tectonic shift in everything with new markets + new ways of doing business. The personal touch of the old generation isn't there anymore. This article is educational + Vivian shares his views on the role of a diamond broker.

(via International Diamond Annual, Vol.1, 1971) Vivian C Prins writes:

Those who are familiar with practice in diamond cutting centers may believe that it is a fairly simple matter to become a diamond manufacturer and to be supplied by one of the De Beers organizations. Anybody who has undertaken the task of manufacturing diamonds will, however, know, in fact how very difficult it is to become a regular client of De Beers. Nevertheless, a manufacturer who envisages a long-term operation on a substantial scale recognizes that the one source of raw material in diamonds which may be reliable will be from an outlet managed by one of the De Beers subsidiaries. In practice, the demand for diamonds from the Diamond Trading Company in London and Industrial Diamonds (Sales) Ltd, the main outlets of rough diamonds in the world, is normally so considerable that only a small fraction of those who would like to be supplied can regularly be offered goods. The intricacies of obtaining such supplies in the first place are such that anybody who is interested, whether dealer or manufacturer, seeks the services of a firm which has specialized knowledge of the process of obtaining from the ‘syndicate’ what is usually known as ‘a sight’.

These special firms are syndicate brokers, sometimes an individual and sometimes a whole organization, who have over the years made it their concern to know what is going on in their particular field of the diamond business. There are ten such firms of whom three are relatively large, and between them they handle the major part of the business.

It is to be supposed that the original brokers, whose work in this field began some 80 years ago under conditions very different from today, existed because the De Beers organization was looking for clients and seeking buyers for its goods. During the last century the broker, therefore, represented both the buyer and the seller, normally obtaining a commission from each side. The state of the diamond business at that time was relatively primitive; since then the De Beers organization, as well as the world diamond trade, has developed enormously. During this period the role of the broker has also evolved from the relatively simple function of bringing buyer and seller together—possibly by having a personal family or business relationship with each party—into a major business where the responsibilities and the services are greatly expanded.

The function of today’s broker is still best described as bringing the buyer and the seller together, and it is essential that he has the fullest confidence of both sides. The Diamond Trading Company, as well as the buyer, must have complete assurance of the broker’s integrity, and the nature of the business also demands as much secrecy and discretion as may be expected of a physician.

One of the big changes in the situation is that, whereas 80 years ago, De Beers were looking for clients, today the Central Selling Organization is able to dispose of their goods readily, and far more people are seeking to become clients of that organization than can be supplied. Thus the broker must do more than merely satisfy the Central Selling Organization that they have a client of adequate financial means and of sound commercial ethics and standards. They must convince the London executives that the client has a major role to play in the diamond business, that he will handle his goods in the manner in which the De Beers organization wish to see them handled, that the business in question is likely to have a long-term future. Therefore, it may sometimes be necessary not only for sons of the principals to be in the business, but to express the intention that the grandsons might well join, too! In other words, the business must be ‘just right’, neither too small nor, in many ways, too large, since the De Beers company have always prudently preferred to split their assets among a reasonable number of solid firms rather than a very few ‘super’ manufacturers or very big dealers. As in all things in life, there are occasional exceptions to this rule!

It is through this maze of rather precise requirements that the broker will lead his client, and with the cooperation of all parties may eventually arrive at a point where the client receives his longed-for sight. It is not an easy road for any of the parties, and just as much as being involved in the technical aspects of obtaining a sight for his client, a broker may find that his tact and abilities are stretched to the limit in persuading his client to exercise patience, when, despite meeting all the normal qualifications, a sight is still not forthcoming. This is particularly true when a competitor has for no apparent reasons been more successful!

Obtaining a client is only a first step. Usually a considerable amount of work has been involved which often includes two or more trips to the client in his home country each year. Despite this, no fee or charge of any kind is made by the broker for these efforts. The broker’s eventual remuneration will depend on a commission from business actually done, and this is sole source of income.

Once the client has become a regular buyer at The Diamond Trading Company he will need to apply for each sight; he will wish to be informed as to various changes in prices, assortments, conditions existing at that company, and he will need to have this information very quickly because it could easily affect pending decisions regarding purchases and sales of his goods. The broker will look after these matters for his client, who may also wish to discuss general world conditions in the diamond market and thus assess his own requirements of rough diamonds. Certainly from time to time the client’s requirements may change, so that once again his broker will be pleading, possibly for more goods, or an additional variety of goods, or, perhaps, for a related company in an entirely different country. Naturally, when the buyer comes to London the broker is at his disposal. He will be present at talks with The Diamond Trading Company. He will also help his client with the purchase of his sight, responding whenever asked for analyses or advice concerning the goods offered—and the broker’s experience must enable him to be a sound judge in these matters. On occasions, the client is unable to come personally. Travel difficulties, illness, family affairs, or just pressures of business may make it difficult for him to come to London. The broker then takes over the whole task of making the purchase on behalf of the client—quite a major responsibility when it is remembered that the purchase may frequently involve several hundred thousand dollars worth of goods. The writer can recall once receiving what to a broker must be the ultimate accolade, when a client indicated that the purchase made was ‘even more satisfactory than when he himself attended’.

What has so far been written on this subject may give the reader some idea of the basic activity of a broker’s function. What is much more difficult to convey is the personal relationship with the client, and the broker’s special understanding of the issues involved. It is this side of the work which makes the syndicate broker’s task exceptional. In general, clients expect their brokers to understand their problems so fully that the broker can give advice. Indeed, if the relationship is as it should be without fault. Those who know the diamond business may well also realize that psychology and approach to business in the Pelikaanstraat or on 47th Street may be very different from the attitudes in the offices of The Diamond Trading Company. It is the broker’s task to smooth out these differences and to avoid any misunderstandings that could be caused. It is also natural that many diamond people have an inadequate command of the English language. Most of them were born in Belgium or Poland and the competent broker must be capable of speaking to his client in a language which he understands and of being an interpreter when discussions take place with The Diamond Trading Company. A further small but valuable service must be given to the client. He must be able to use his broker’s office as his own, receiving any kind of secretarial, telephone or telex service which he would require in his own office, and very often he receives, in addition to this, assistance in arranging his travel and shopping plans! The syndicate broker is anxious to do everything to make his client feel at home.

It can be seen that, with the diamond business operating on an important scale in Antwerp, Tel Aviv, Bombay and New York, and on a lesser scale in several other countries, a syndicate broker not only requires an alert and efficient office organization to help take care of administration and communications, but he must himself be prepared to travel almost every month to meet his clients in different parts of the world, and to be up-to-date with the situation in general, and, of course, to study his clients special needs. During these travels the broker will see many factories and have many conferences. He will himself ask many questions, and many enquiries will be made of him, but through his constant activity, always coming to a climax at the London sight, he will play his special role in lubricating the wheels of the diamond business.