Stockbrokers need to look beyond poor economic conditions and consider their own value proposition if they are to regain investor confidence, a financial services executive said.
GBST broker services and financial services chief executive Denis Orrock said blaming markets on the lack of confidence investors have in the markets is an easy out.
“I think to simply say that the markets are bad is an easy cop-out,” Orrock said late last month ahead of his presentation on the future of the sector at the 2012 Stockbrokers Association Conference.
“I think certainly you have to look at the value proposition to being a stockbroker, and if stockbrokers can’t identify that value proposition then they’ve got a bigger problem than they probably realise.”
Orrock said the environment for stockbrokers is “fairly challenging” at the moment.
“The volumes and liquidity has certainly been driven lower over the last five years, the continued instability in international markets in the Eurozone continues to hang over the world to a degree,” he said.
He said Australia’s political landscape has not helped put stockbrokers in “a favourable light” with investors.
“I think investors to a large degree are fatigued with losing money and probably are lacking confidence in the market at the moment and the challenge I think for the industry at a broader level is what are they doing to combat that investment fatigue,” he said.
Orrock said a possible way to combat poor investor sentiment is develop the brand value of the profession and understand that stockbrokers are now competing with other wealth professionals.
“A lot of that should be around engaging investor trust and obviously investor recognition from the services they provide,” he said.
“I think ultimately they might say they are competing with each other, but ultimately they are competing with financial planning, they are competing with accountancy, they are competing with other avenues of wealth advice.”
According to data from researcher Investment Trends, investors are shying away from using stockbrokers and, in some situations, financial advisers for their share investing.
The self-managed superannuation fund (SMSF) Investor report, released in May last year, found the use of planners for share trading has fallen 24 per cent.
The report of 3051 SMSF trustees found the use of a full service stockbroker had dropped from 19 per cent down to 17 per cent, the report said.
“The usage of financial planners for doing direct share trading has diminished quicker,” Investment Trends senior analyst Recep Peker said.
“Seems like more SMSF investors have decided to do it themselves, go through an online broker.”
Orrock said another challenge for stockbrokers is the high level of regulation, particularly around market supervision and associated costs.
“They are in a difficult place at the moment as they are heavily regulated,” he said.
“They are in probably a more complex regulatory environment that probably exists for the financial planning segment at the moment.”
