If I asked you to name a famous stockbroker, who would you answer? The fictitious Gordon Gecko, or perhaps the real life Wolf of Wall St might come to mind. So might imagery of excess - fast cars, Italian suits and extravagant lifestyles. However, wherever there is excess, there is always room for someone to undercut and disrupt the status quo. In 2016 the infamous stockbroker is either a heavily regulated wealth manager or a computer. Sorry to disappoint you.
At last week’s Stockbrokers Association of Australia annual conference, it was regulation and technology that dominated the agenda.
Since the occurrence of some high profile failures (like Storm Financial), the Government has enacted stronger rules to better protect consumers through the Future of Financial Advice (FOFA) legislation. The onerous new disclosures, new rules around remuneration and acting in the best interest of a client have shaken up the financial advice industry. But stockbrokers have been afforded important “carve-outs”, as they argued that shares are product neutral, and advisors are not financially motivated to push one stock over another. But are they?
ASIC Chairman Greg Medcraft last week warned the industry that the grid or commission structure under which stockbrokers are remunerated encourages brokers to get clients to trade more frequently. More trading equals more brokerage or commissions... that’s an incentive isn’t it? Medcraft signalled that ASIC would be turning its attention to the carve-outs, potentially biased research and compliance policies in the near term.
Good-bye Maserati bonus.
Along with tighter regulations, technological innovation has developed opening the door to cut-price and DIY broking. Gone are the days of 2-5% brokerage on trades, and instead a cut price minimum of $10 or 0.11% norm exists. To compensate, the typical broker has had to change their business model and value proposition from mere transactional, to holistic advisor. The imagery of the slippery 80’s broker is no more.
Interestingly, it was the appointment of ANZ’s new Chief Financial Officer Michelle Jablko that triggered the most divisive debate in the industry over the last week. Why? Angus Aitken who headed Bell Potter’s Institutional Equities division sent a note to clients saying “former investment bankers tend to be crap at most things in the listed world”. He went on to explain some reasoning, and then reiterated his recommendation to sell ANZ. ANZ’s head of corporate communications took offence, tweeting “Sexism alive + well in stockbroking?”
But can ANZ really call the kettle black after their recent issues on the trading floor, which were reminiscent of the before mentioned Wolf’s behaviour?
Aitken had lost his head in the debacle and ANZ now faces a defamatory law suit.
It’s a shame that this overshadowed some important and healthy debate on how to increase the gender balance in stockbroking.
