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Traditional brokers say lower trading fees 'not end game' as competition heats up

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SINGAPORE: Incumbents in the brokerage industry are looking to spruce up their digital offerings and speed up other processes such as account opening, as a flurry of online trading platforms fires up competition.

Some have also adjusted their fees in response to the new breed of low-cost online brokers, although they said that a race to the bottom should not be the end game for the industry.

Retail investors have been spoilt for choice, with new entrants – such as Tiger Brokers, Futu’s moomoo and more recently, Syfe – taking the number of retail brokers here to well over a dozen.

The upstarts tout much lower trading fees and easily usable mobile apps with fuss-free sign-ups and payments. Coupled with generous welcome gifts like commission-free trades, cash credits and even free shares, they have captured the attention of investors, especially those from the younger cohort.

Professor Lawrence Loh from the National University of Singapore (NUS) Business School said the flurry of new digital brokers is “overdue”.

Mom-and-pop investors, armed with information and news, have grown more savvy over the years, he noted. Coupled with the COVID-19 pandemic pushing more aspects of one’s daily life online, “it’s quite natural that investing will become one of the things that can be done online too”.

“From the demand side, all the planets are aligned,” said Prof Loh.

While the existing players have rolled out their digital trading platforms for many years now, some have since been “a bit sluggish and complacent” with innovation, he added.

“If you are not too demanding, one can be quite happy with them … But to attract the younger crowd, you will need more features,” the NUS professor said.

Ms Christine Lee, an assurance partner at Ernst & Young’s financial services team, noted that traditional brokerages tend to offer a hybrid service comprising human brokers and remisiers, alongside an online platform.

Pure-play online trading platforms are typically fully automated, enabling them to pass on cost savings to consumers. They also have “less legacy baggage” and are better positioned to tap technology to disrupt the industry, she said.

NEW APPS, NEW PROCESSES​


The traditional brokerages told CNA that they view the heated competition positively.

They also believe that their wider range of trading products, services and markets, as well as in-house research and market insights, remain appealing to investors.

“We always welcome competition,” said Phillip Securities’ managing director Luke Lim.

Still, the existing players are not letting their guard down.

Phillip Securities, for one, has refined its account opening process to allow online sign-ups via SingPass and fund deposits through PayNow since the start of the pandemic. These have shortened the time needed to onboard a customer from days to mere 15 minutes.

The long-time brokerage, which was the first to launch an online trading platform in Singapore in 1996, also rolled out a new design to its mobile app earlier this month to allow users “easy and intuitive access” to information and products.

The revamp was necessary as more people – both new investors and existing customers – now prefer to use the app to monitor market updates and receive insights on the go. “In terms of user rates, it’s about 60 per cent on mobile and probably 40 per cent on web now,” Mr Lim told CNA.

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On whether the incumbents have been slow to innovate, Phillip Securities said it is acutely aware of the need “to move fast”.

“Of course, we wished we launched the app yesterday but it takes time to build … and this time, we did it differently,” said Mr Lim, noting that the brokerage surveyed more than 100 users through the process of developing the revamped app.

The feedback gathered from focus groups and weekly product demonstrations has given it ideas for “a pipeline of new product features” that will be rolled out subsequently this year and beyond, such as systematic trading to US stock options and ESG thematic investing.

Maybank Securities said that all along, its offerings are tailored for investors who are “further along in their financial and professional careers (and) require a broader depth of financial services”.

“If you are an 18-year-old or a university student looking to make your first investment, the capital you have may not be significant … The reality is, you’re likely to go where it’s cheapest,” said its head of retail business Alexander Thorhauge. “This is why at the moment, the newer entrants cater better for the new investor.”

“However, fast forward a little and you’re a few years into your professional career, that might change. People look for diversification in their overall wealth and portfolio, and that’s where we and some other players have a little bit of an advantage,” he added.

That said, the brokerage, which was founded in Singapore in 1972, noted that while it will continue to play to its strengths, it cannot ignore changing demographics and demands of new investors.

Moving forward, it will place a “heavy” focus on revamping and simplifying its digital trading platforms, in particular its mobile app. It is also looking to “modernise” its customer onboarding and account funding methods in ways that will cater to a younger generation, said Mr Thorhauge.

PRICE WAR – GOOD OR BAD?​


The incumbents have also responded to the competition with some adjusting the cost of trading for investors.

Phillip Securities launched Cash Plus, a low-cost trading account in January 2020 to attract “price-conscious” investors. For example, those with this account can trade US shares online with flat rates from as low as US$1.88, compared to the cash management account that charges a rate of 0.3 per cent or a minimum of US$20.

“Of course, one important thing, at least for the longer term, is we need to make sure that our products are priced affordably,” said Mr Lim.

Another existing player, FSMOne.com, reduced its flat commission fee for Singapore-listed stocks and exchange-traded funds (ETFs) from S$10 to S$8.80 in April last year. FSMOne.com is the digital trading platform of iFast Corporation, which rolled out its stock-broking services here about six years ago.

Its general manager Jean Paul Wong noted that it is likely that traditional brokerages will face “longer-term pressures” amid competition. But while investors will benefit as fees go down, “it cannot be just down to fees when it comes to demonstrating value for clients”, he added.

Mr Wong also cautioned of a “high cost” to bear, alongside “a question of sustainability in the longer term” for those that focus on offering cut-throat prices and attractive freebies.

“iFAST does not see low fees as the end game or only differentiating factor … If it’s just about pricing, the traditional incumbent stock brokers would lose substantial market share given their fairly exorbitant pricing for stocks and ETFs,” he told CNA.

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The differentiations will have to go beyond prices, said Mr Wong, adding that only players that innovate their business model and financial technology capabilities, while thinking of their clients’ needs, will continue to do well.

Ms Lee from Ernst & Young echoed that while lower fees “will, at face value, be attractive to consumers”, it is important to avoid a race to the bottom.

“The best services are not necessarily the ones that cost the least. There must also be a reward for innovation,” she said.

This is why apart from upgrading their technology and other processes, the existing players said they continue to invest heavily in research and investor education.

FSMOne.com recently launched its own video content channel, iFAST TV, to provide investors with round-the-clock updates from its research teams, business partners and financial professionals.

It also noted that it does not offer options trading and cryptocurrency trading as “complex or gambling products offer no long-term value to investors”, especially newbies.

“If there is little education offered to newbies investors, this can be detrimental for their financial health which is amplified when market conditions turn volatile,” Mr Wong said.

Over at Phillip Securities, Mr Lim said that consumers still appreciate the ability to tap on market experts for advice despite placing greater emphasis on convenience and efficiency in an all-in-one app.

This is where humans – a key part of a traditional brokerage – come into play, he added. The brokerage currently employs more than 1,000 sales representatives, trading representatives and remisiers.

To be sure, the role of a remisier is no longer the same as in the past, which involves primarily order taking and executing trades for customers. These days, the role is more of one that offers advisory and market insights. Many have also taken up new skills and knowledge to meet the changing demands of investors and even moved beyond traditional stockbroking to other financial products, said Mr Lim.

“We have the app and our trading representatives. By marrying the two, we have a ‘high tech, high touch’ service offering,” said Mr Lim.

“I know (the new players) have very aggressive marketing and giveaways to attract users. I feel that Singaporeans enjoy the gifts but they also value quality and service. By providing both, I think investors will be able to choose who they want … in the longer term.”

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