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

Financial Mail - Investors Monthly - - Front Page -

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.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.