Stockbroking world

On a recent trip to the Natal midlands, I was privileged enough to stay in a friends heritage farmhouse. In the reading room of Tweedie Hall was the August 1930 edition of the National Geographic. Interestingly, most of the advertisements focused on ocean liner, airline or travel agency companies. One in particular grabbed my attention which I subsequently photographed on my iPhone.

The Leviathan, the world’s largest ship at the time was seeking to assure its clientele that their voyage to Europe would be cladded in comfort. Yet in amongst all the opulence, the elite traveller would not be far from his stock market investments. Take a read…

Honestly could you create a cooler service if you tried? Surely we have gone backwards? The same could be said for the Concorde. Will supersonic travel ever be that cool? Unlikely. What’s got in the way? Why have the experiences with lots of our service providers not progressed? To me the answer is simple; the role of either technology or people has taken centre stage. Very rarely do we cleverly blend the two together. We’re either technophobes or peoplephobes. Our business are either predominately offline or online. You get the point? The United States Lines ship to shore stock market trading service is as good a blend as you ever will find.

The problem with their offering was that unless you were a cousin of Rockefeller you were unlikely to experience it. I am fairly certain that somewhere in that fine print at the bottom it mentions that “third class passengers are encouraged to remain in their quarters at all times…!”

So where does that leave us, the modern day stockbroker in South Africa? Let’s jump 82 years on. You essentially get two types of brokers. Your traditional broker focuses heavily on the provision of extensive market research and maintaining one-on-one relationships with their high net worth clients. Then you get your online brokers who try keep costs down by having as few staff as possible and providing self-service retail grade trading tools, data and platforms. These guys concentrate on the DIY (“leave me alone”) type customer. Some offer both flavours.

What this essentially creates is a gap, which has hampered the growth of the self-directed investor market in the country.

There are roughly 200 thousand active JSE retail accounts (direct BDA) plus another 100-150 thousand (educated guess) non JSE accounts held with local brokers (including over-the-counter brokers like Global Trader) and then another X thousand (unknown) accounts held with off shore providers (FxPro, iForex, eToro etc.).

Whichever way you look at it (accurate data or not) it’s a very small portion of 49 million. It remains a niche business.

The gap includes;

• Novice investors seeking genuine educational handholding and advice. The traditional brokers don’t offer these services. The online operators generally offer self-help learning. This is not sufficient in an environment where the culture of self-investment does not exist and education levels around market investing / trading, is low. These consumers often dabble and experiment with the online providers for a few months only to exit and never return.
• The person looking to trade markets with anything from R1000 per month. Traditional brokers tend to offer only on-exchange trading, which is not cost effective at this LSM level. Brokers offering off-exchange derivative forex, indices and commodities trading tend to be off-shore providers. Their model is truly online only and not suited to un-savvy traders needing face to face, localised, human support.

For quite some time, this area (the white space) has become a hunting ground for an increasing amount of “entrepreneurial” businesses selling R30, 000 (and more) charting packages, rapid classroom training and 1-2-3 trading strategy manuals to vulnerable individuals looking to learn about and profit from financial trading. The marketing tactics are alluring (get rich from home trading Forex in 5 days...etc.) and a large amount of providers are unregulated by the FSB. There are obviously a lot of good (ethical) initiatives (driven by online brokers, the JSE etc) happening in this space, but they are failing to make significant inroads into the number of people starting the journey into self-investment with a well-defined learning path and method. These predators are not going anywhere, but I am led to believe that they are a focus point for the FSB.

So the question is, how do we get more South Africans to understand financial markets and take a greater interest in participating in both short and long term investing? The architects at GT247.com have made some inroads of late... We have taken a hard look at the online : offline equation (the way our humans and tech work together) and looked at innovation through technology beyond our trading platforms.
Our view;

• Self-service learning is simply not good enough. Trading is complex. People need to be mentored not overwhelmed. As a broker, if you are aiming to profit directly through educational services, your intended outcomes for your customers will not be met.
• Traditional market / company research formats and distribution models don’t work for the retail investor (especially for beginners).
• Regular people find comfort in other regular people not necessarily the intimidating rhetoric of gurus.
• Unless you hold your customers’ hands and watch out over them, their journey into stock market investing will be short lived.
• Simple trading platforms are more effective than complex ones. Mobile will rule.
• Trading is not for everyone; don’t force square customers into round products.
• It’s not about the instrument. SSF’s, ETF’s, CFD’s, Equities, Indices, Forex Pairs…they all have a place.

Noteworthy executions of the above principles include our;

New educational service, which ensures that our customers have a well thought through trading strategy and learning path. Our What’s Stopping You self-evaluation which gives you an honest assessment of whether you have what it takes to start trading. Our innovative Smart Profiles research platform, which deliver (3rd party and in-house) technical and fundamental ideas (both short and long term), fully managed from cradle to grave. The Wire, our social network gets our customers following each other’s moves, learning and interacting. Our active CRM platform ensures that we reach out to our customers when they need the guidance most. Our mobile platforms (soon to be released) encapsulate all the above and provide an all-round (beyond the platform) trading experience to anyone with a “smart” phone / tablet and a 3G contract.
The Leviathan is now open for boarding to all!

These new products and services are paying dividends. To prove this, we took an everyday Joe off the street and got him to a point of placing his first live trade. We believe he potentially may have even known what he was doing…which really is the only point…