Popularising market participation
The health of our capital markets, and the economy as a whole, depends on political support. And that in turn depends on South Africans feeling they have a vested interest. There is no better way to achieve that than by having individuals invested directly on the JSE. That requires the intermediaries between individuals and the market — retail stockbrokers — to do their best to connect the two.
The good news, as this month’s Investors Monthly makes clear, is that the brokers are excelling. The research undertaken by Intellidex shows that brokers get very high scores for client satisfaction — even the laggards in the market. They do far better than similar surveys of clients of big banks, for example. As the research makes clear, brokers have been innovating at pace, driven by the competitiveness of the market and by the benchmarking process that we have published for the past five years and share here again this month.
Innovation is one key driver of success for brokers, but the scope they have to get individuals into the market is also aided by the regulatory environment. The introduction of tax-free savings accounts (TFSAs), for instance, has enabled stockbrokers to market to a new investment audience that will be attracted by the low costs and tax savings embodied in such accounts. Brokers have developed innovative ways to make TFSA accounts cheap, such as this year’s winning firm, GT247.com, which charges only a 0,25% commission and zero account fees for TFSAs — the cheapest way to get equities exposure that we know of. Strate, the central securities depository, cut its fee by two-thirds for instruments used in TFSAs, helping brokers pass on more savings.
More can be done. Treasury has been tentative in allowing only exchange-traded funds, not individually listed companies, into TFSAs. The logic is that ETFs are lower risk, as portfolios without concentrated single exposures. But individuals should be free to build portfolios however they like, taking on risk where it makes sense for their life stage and risk appetite. Treasury should at least allow for blue-chip stocks to be held in the accounts, such as those included in the top 40 index. An increase to the R30 000/year limit would help too.
There is also more that the JSE could be doing. The exchange has run a lukewarm marketing campaign around tax-free savings accounts, essentially directing clients to approach registered brokers. But a campaign specifically around the advantages of equity ownership, rather than other asset classes, would surely be in the interests of the JSE, its members and the public.
Other markets, such as Canada, which has a similar TFSA regime, have received a stronger response from the general public, particularly for equities-based accounts. In SA we need to work on building a general understanding of equities and the way the JSE works, something for which the JSE itself should take responsibility. Its member broker firms can fight it out to attract clients from the growing pool of interested members of the public.
We also recognise the role of the media in providing information and educating the public about their investment options. That is why we are proud to publish the results of Intellidex’s research efforts and have built our editorial proposition around reporting on investment for the general public. If everyone does their bit, the country will derive the long-term benefits.
Individuals should be free to build portfolios however they like, taking on risk where it makes sense for their life stage and risk appetite