THE BEST STOCKBROKERS IN SA

There is a growing demand from clients for offshore investment as political storms brew in SA and firms are also under pressure to keep up with innovation, writes Colin Anthony

Stockbrokers have been working hard to improve, adding products and services to widen their appeal

Stockbroker clients are becoming increasingly concerned with political issues in the face of a shrinking economy.

Trading volumes are falling, putting pressure on stockbroker revenues and the firms in turn are adapting, adding products and services to improve their value to clients.

Franette Bloom, Sharenet’s head of wealth, says political uncertainty, the state of the economy and the sideways movements of markets over the past 40 months have reduced risk appetite and trading volumes. Clients are increasingly seeking global access and are wanting more value for money from brokers.

“Lower than desired investment returns, which inevitably results in pressure on fees charged by the vendor, has become a recurring topic of discussion,” she says. “The local markets have underperformed against global markets and political issues are clearly fuelling the movement to ‘safer havens’. Clients are making decisive moves to take their money out of the country, investing into global markets at competitive comparable fees.”

Afrifocus has had similar experiences with clients. MD Eugene Chemaly says performance in a low-return environment is an issue, resulting in reduced volumes which he believes is linked to the lack of business and consumer confidence. “We believe the uncertainties with regard to issues such as land expropriation is causing angst among investors.”

Chemaly confirms a trend — picked up over recent years in this survey — that investors want a comprehensive service offering, from stockbroking to wealth management. Afrifocus, in response, has attained CAT and FSP licences, enabling it to present a more holistic financial services offering including private client stockbroking, full discretionary portfolio management and wealth management.

Dean MacDonald, business manager at Standard Online Share Trading/Stockbroking, says: “We have experienced significant demand from clients to invest directly offshore in both the self-managed and discretionary/advisory businesses. Clients are looking for relatively lower-risk foreign invest- ments that could generate sound returns, factoring in any exchange-rate fluctuations.” He says demand is increasing for locally listed ETFs, structures or shares that offer offshore exposure.

Another significant factor has been “the ratcheting up of wealth taxes”, which has made

high-net-worth clients more reluctant to trade, but more open to borrowing using their shares as collateral, as well as derivative and wrapper structures. Increased taxes in SA, says MacDonald, have driven increased demand for tax-free savings accounts and for the ETFs that can be held in these accounts. Currency hedging and trading in currency futures are also growing in popularity.

In this market, stockbrokers have been working hard to improve, adding products and services to widen their appeal, particularly to improve access to offshore investment markets. Technological advancements are also prevalent. But they have also been focusing on the “little things” that are so important to the client experience, such as upgrading websites to make it clearer and simpler for users. We recognise their efforts with the Most Improved Broker award, won this year by Unum Capital.

Standard Bank OST/Stockbroking is the Top Stockbroker of the Year for the third consecutive year. It also won in the survey’s maiden year in 2010 and in 2014. The firm has established itself as the one to beat, despite many changes to our survey structure and methodology as it has evolved over the years.

The depth and breadth of its offerings cannot be matched, complemented by close attention to detail. It uses its muscle well, drawing on resources from the wider Standard Bank Group when required, easily accommodating the market trend of integrating stockbroking with wider personal finance, wealth management services and excellent research offerings.

Standard is also the topranked broker for “available instruments and trading tools” and “client support including research and educational tools”.

Rand Swiss, which launched only in 2015, takes second place overall. It is another firm that is integrating stockbroking with other investment offerings. Director Gary Booysen says it has been focusing on growing its three divisions: stockbroking and trading; asset management and discretionary portfolios; and wealth management. The latter was launched last year.

A major addition was the official acceptance of Rand Swiss’s status as an SARBapproved Treasury agent, facilitating low-cost international transfers for clients.

Absa Stockbrokers & Portfolio Management made strong gains this year to take third place. It’s a commendable effort in the face of the brief marriage then divorce from Barclays Plc, which has taken up a lot of management attention.

While Absa caters well to clients across all archetypes, it makes a special effort to nurture novice investors into sea- soned traders. It has been putting in a lot of effort to widen its appeal and now has an impressive offering in which traders can go long or short in selected ETFs that track US indices. Absa is also this year’s top-ranked firm for “responsiveness and transparency”, factors which are scored as part of Intellidex’s mystery shopping exercise.

DWT Securities, a niche derivatives broker that caters mainly to day traders, wins the People’s Choice award, which it also won in 2016. Its clients are fiercely loyal and overwhelmingly positive in their ratings. Unum Capital is second and Sharenet third on the People’s Choice votes.

Afrifocus Securities is the Top Advice Broker of the Year, with Sasfin Securities second and FNB Securities third. This category specifically recognises those firms that specialise in face-to-face and telephone-

Despite the constant evolution the industry faces, broking is still essentially a lowmargin business

based advice for clients. Afri- focus recently introduced a wealth management offering via the Allan Gray and Sanlam Glacier platforms. Almost three-quarters of its clients place trades telephonically, confirming the firm’s oldschool values, but it also caters fully to online, active traders via the Velocity platform.

EasyEquities is the Top Online Broker of the Year followed by IG SA and DWT Securities. EasyEquities has always impressed with its innovation as well as its concerted efforts to make investing fun. It’s not afraid to try new concepts and is a market lead- er in facilitating shared experiences between clients. It has been highly impressive in its efforts to attract first-time investors, using youth-focused media to do so.

It is also one of the lowest- cost brokers around and this year is ranked as the best value broker. It also wins the Top TFSA of the Year award for its tax-free offering.

Unum Capital is also the Top CFD Provider of the Year, with Sharenet second and IG SA third. A mix of client feedback, risk and Intellidex’s assessment is used to score this category, and Unum’s clients propelled it into first place.

Amid all the political noise facing the markets, clients are seeking guidance. Shaun Keeling, EasyEquities brand manager, says there is a hunger for educational content on the concepts and principles of investing, risk, what to invest in and investment terms and processes. Cost efficiency and ease of use are also important.

PSG Wealth is focusing on improving its clients’ support services and presents a strong research offering on macro, economic and political devel-

opments, along with special notes for advisers. At the same time, says Grant Meintjes, head of PSG Securities, clients can be flooded by information and need additional guidance from their stockbroker to make sound investment decisions.

“We believe in the value of fundamental research and in the importance of having a long-term trading and investment strategy in place.”

But clients are also looking to get more bang for their buck and many firms have started introducing cryptocurrency products, with foreignexchange facilities also in demand. Unum Capital CEO Mark Weetman, whose firm has launched several alternative investment portfolios, says he has noticed clients are worried about the prevalence of “get-rich-quick” schemes, offshore scams and the presence of unregulated brokers.

IG SA also notes this, saying: “A number of clients are concerned by the increase in unregulated firms operating out of parts of Europe entering the local SA market. As a result clients are increasingly concerned with trading with a regulated, trusted provider.”

Clinton Sprong, head of private clients at Sasfin Securities, highlights some of the challenges facing stockbrokers in today’s environment.

First, he says, SA investors are increasingly starting to think in global terms and require access to the world in formulating an optimal investment solution with genuine global solutions via world securities exchanges.

“From a service perspective, it is the digitisation of financial services. Consumers demand increasing convenience and less friction at every point in the value chain. Unfortunately, linked to digitisation is the increased prevalence of cybercrime, which is very much front of mind for our clients and for us.”

It is no simple thing for stockbrokers to stay at the cutting edge of technological developments, widen their range of products and services while maintaining strong rela- tionships with clients and focusing on the small details. That’s a costly process.

Despite the constant evolution the industry faces, broking is still essentially a low-margin business that relies on high volumes. Given the flat markets of the past 40 months, those are not forthcoming. Clients, however, can feel assured.

This survey provides a rigorous assessment of SA’s stockbrokers, with their clients ranking them on a wide range of products and services. The story they tell, backed up by Intellidex’s own interrogations, is one of excellence across the industry — not just among the award winners — with firms constantly seeking to evolve and improve.