METHOD­OL­OGY

Financial Mail - Investors Monthly - - Cover Story -

THE STOCK­BRO­KER OF THE YEAR

THE STOCK­BRO­KER OF THE YEAR sur­vey is con­ducted by In­tel­lidex, a spe­cial­ist fi­nan­cial cap­i­tal mar­kets re­search house.

This is the ninth year we have as­sessed SA’s re­tail stock­bro­kers. This year 16 firms par­tic­i­pated, with 6,380 of their clients com­plet­ing an on­line client sur­vey, rep­re­sent­ing a sub­stan­tial sam­ple of the mar­ket.

The struc­ture and ap­proach of the project has been in­formed by the ex­pe­ri­ence we have built up over past years, as well as feed­back from the stock­broking com­mu­nity and stock­broking clients. Over­all, we aim to blend qual­i­ta­tive client feed­back with data pro­vided by the firms and In­tel­lidex an­a­lysts’ judg­ment where nec­es­sary.

The awards recog­nise firms in two main cat­e­gories: the Top On­line Bro­ker and the Top Ad­vice-Based Bro­ker. This di­vi­sion recog­nises the two main types of stock­bro­ker and sim­i­lar fi­nan­cial ser­vice providers that op­er­ate in the mar­ket and the types of ser­vices in which clients are in­ter­ested.

These two awards are com­ple­mented by an over­all award, Top Over­all Bro­ker. There is also an award based on client feed­back, the Peo­ple’s Choice award, and we recog­nise the top bro­kers in con­tracts for dif­fer­ence (CFDs), a type of de­riv­a­tive, and tax-free sav­ings ac­counts. We pro­vide as­sess­ments of which firms cater best for spe­cific client seg­ments, and spec­ify which firms ex­cel in dif­fer­ent cat­e­gories, such as value for money and range of in­stru­ments avail­able. Each of these has dif­fer­ent cal­cu­la­tion method­olo­gies, which we ex­plain be­low.

We cover two types of firms: regis­tered stock­bro­kers and regis­tered fi­nan­cial ser­vice providers (FSPs) that of­fer stock­broking-like ser­vices. Regis­tered stock­bro­kers tend to be older firms fo­cused on per­sonal re­la­tion­ships with clients. FSPs tend to be on­line- and ex­e­cu­tion-only and fo­cused on de­riv­a­tives such as CFDs.

Only regis­tered stock­bro­kers are al­lowed to call them­selves “stock­bro­kers” in terms of leg­is­la­tion, though it has be­come com­mon us­age to re­fer to ev­ery­one who sup­plies stock­broking-like ser­vices as stock­bro­kers. Be­cause our pri­or­ity is to pro­vide a use­ful ser­vice to the pub­lic, for whom the dif­fer­ence is of­ten ir­rel­e­vant, we in­cor­po­rate both regis­tered stock­bro­kers and FSPs in our sur­vey. The re­search has three legs. First, a com­pre­hen­sive ques­tion­naire is sent to stock­bro­kers, ask­ing for de­tails of their prod­ucts, pric­ing and mar­ket po­si­tion­ing. Sec­ond, a mys­tery shop­ping and desk­top re­search ex­er­cise is un­der­taken by In­tel­lidex an­a­lysts to ver­ify the in­for­ma­tion pro­vided and as­sess the is­sues of trans­parency and re­spon­sive­ness. Fi­nally, a ma­jor on­line sur­vey is un­der­taken of re­tail stock­broking clients. Clients rank their bro­kers on nu­mer­ous fac­tors. These scores de­ter­mine the im­por­tant Peo­ple’s Choice Award and feed into some of the other scor­ing cat­e­gories where rel­e­vant.

The Top Ad­vice-Based Bro­ker and On­line Bro­ker scores re­flect a com­bi­na­tion of In­tel­lidex’s views and client feed­back. The In­tel­lidex view gets a weight­ing of 80% and client feed­back con­trib­utes 20%, but the In­tel­lidex view is in­formed by both firm and client feed­back. For the Top Ad­vice-Based Bro­ker, the client in­put con­sists of rat­ings for ad­vice on in­vest­ment de­ci­sions, qual­ity of fun­da­men­tal

We aim to blend qual­i­ta­tive client feed­back with data pro­vided by the firms and In­tel­lidex an­a­lysts’ judg­ment where nec­es­sary

re­search, rec­om­men­da­tions to buy or sell, macroe­co­nomic anal­y­sis, qual­ity and ser­vice lev­els of tele­phone-based trad­ing, ad­vice on cor­po­rate ac­tions and value for money. For the Top On­line Bro­ker, client in­put in­cludes the as­pects of ser­vice with IT queries, help with un­der­stand­ing the trad­ing plat­form, ease of use of the on­line trad­ing plat­form and ac­cess to data.

The Top Over­all Bro­ker award is in­formed both by client in­put and an In­tel­lidex as­sess­ment. The as­sess­ment takes into ac­count cost of trad­ing, a mys­tery shop­ping ex­er­cise (which looks at re­spon­sive­ness and trans­parency), avail­able in­stru­ments and trad­ing tools, and client sup­port and ed­u­ca­tion tools. The client in­put is a con­sol­i­da­tion of the client in­put used for the On­line and Ad­vice-Based bro­ker cat­e­gory. Then we pro­vide an as­sess­ment of bro­kers that are suit­able for dif­fer­ent client types.

The Peo­ple’s Choice award is based on client feed­back on two met­rics: clients’ over­all rat­ing of their bro­ker, and their re­ported like­li­hood of rec­om­mend­ing their bro­ker to friends or fam­ily.

The top tax-free sav­ings ac­count provider is de­ter­mined from client feed­back. Clients who have opened an ac­count with their bro­ker rate the ease of open­ing the ac­count and the ser­vice they have re­ceived since do­ing so.

The top CFD provider is also de­ter­mined from a mix of client feed­back and an In­tel­lidex as­sess­ment of the trad­ing costs and credit-risk­i­ness of the provider. Client opin­ion on CFD re­search is con­sid­ered. Bet­ter scores for risk are given for firms where the coun­ter­party for CFDs is clear and has a large bal­ance sheet. Small or ob­scure bal­ance sheets re­ceive lower scores.

The method­ol­ogy will con­tinue to evolve to stay abreast of in­dus­try changes and as we re­ceive fur­ther feed­back.

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