An Intriguing New Approach to the Old Brokerage Industry: Making It Great Again!

An Intriguing New Approach to the Old Brokerage Industry: Making It Great Again!

The Story of the Singapore stock market and brokerage business

The Singapore Exchange (SGX) was formerly known as the Stock Exchange of Singapore (SES).

The SES was a stock-exchange company formed in Singapore in 1973 after Malaysia ended currency interchangeability between Malaysia and Singapore.

The Stock Exchanges of Malaysia and Singapore (SEMS) was then separated into the SES and Kuala Lumpur Stock Exchange Bhd (KLSEB).

Remember this? Veteran brokers might recall the old trading room with fondness.

Phillip Securities, a stock brokerage firm that started in 1975. Source: PhillipCapital

Fast forward to the late 80s and 90s, when the stock market boomed!

SINGAPORE, 1997. The Singapore International Monetary Exchange (Simex) was the first financial futures exchange in Asia set up in 1984 to deal in financial products and commodities. Source: Hiroji Kubota/Magnum Photos

In 1999, the SES was merged with Simex and the Securities Clearing and Computer Services Pte Ltd (SCCS) to form SGX.

How did stock broking work in the past?

The primary role of the stock broker in those days was to facilitate trades. Stock brokers helped their clients buy and sell stocks, under specific instructions.

If a client intended to place an order, he could only do so by calling his broker.

Brokers were experienced investment professionals who were able to advise their clients on trades.

This tradition of experience and qualification continues till today. Today, to become a stock broker, you have to pass several professional exams administered by the Institute of Banking and Finance. The Monetary Authority of Singapore (MAS) and SGX will assess your eligibility for appointment as a licensed Trading Representative – commonly known as remisier – after you have passed these exams.

How has stock broking changed?

The advent of technology has totally transformed the trading process for investors.

Brokerage platforms can now execute trades much faster. They also provide access to foreign stock markets. They offer many more features to the everyday retail investor to empower them to trade.

Through such empowerment, investing has become democratised.

While benefiting the mom-and-pop investors, the impact on stock brokers has been less favourable.

In the last decade, the number of remisiers shrank. The Straits Times reported at the end of 2016 that only 1,097 dealers and 2,355 remisiers were active in the Singapore market. This was down from a high of 1,333 dealers and 3,032 remisiers in 2011 . Their numbers could be even lower today.

As veteran and top-tier remisier at PhillipCapital, Robin Ho, said: ”I joined the stock broking industry in 2002 after working 23 years in the civil service. The reason for leaving an iron-rice-bowl job in a senior position to pursue a career in trading was primarily motivated by the low trading commissions that only a remisier could enjoy”.

“I started trading in the 1993-1994 period, when Malaysian stocks were traded in Singapore via CLOB, the Central Limit Order Book. In those days, the trading commission was 1%. With the cost of trading so high, day trading was not an option. Most traders adopted a swing trading strategy. This meant trading within the 1-2-week time frame of a contra system that allowed traders to hold trades for 1-2 weeks before their settlement.”

“Despite the high commissions, the long contra period and a highly volatile and active market were more than enough to compensate for our high trading costs. Making money from the market was not that difficult. In the early 2000s, the life of a remisier turned more challenging when commissions were reduced to 0.25%. They have been going down since. This means lower income, though trading volume did pick up as lower cost of trading encouraged more intra-day and contra trading.”

“On the bright side, trading for a living is now possible. When I started to trade full time in 2002, it was something that was hardly heard of.”

“Today, with an influx of online brokers, some foreign brokers are even charging zero commission. Traditional local brokers still charge low fees of 0.10-0.20%. The industry is deemed by many to be heading towards the sunset and as a consequence, is unable to attract young talents.”

Thomas Ng, Principal Trading Representative at PhillipCapital, remains positive as he noted: “We live in an era of disruption. Only by adopting a growth mindset and constantly learning and exploring new things can one succeed in this new era. Stock broking started with brokers taking orders for their local market. Today, brokers like me monitor at least 3-4 global exchanges and study different asset classes and their mutual impact, so that we can give rounded opinions to our clients.”

“In addition, the broker today needs to choose from a multitude of financial products and services and curate them to match clients’ needs. Essentially, the paradigm has changed and we shift accordingly.”

What does this mean for people in the industry?

Good things, actually!

Besides the onslaught of technology, clients today have higher expectations. They also have more complex needs. This forces the industry to evolve, and quickly.

One financial institution that never rests on its laurels and is leading the charge is PhillipCapital.

Since its inception as stock broker back in 1975, PhillipCapital has built up its assets under management (AUM). They now exceed USD 35 billion. The investments come from over 1 million clients globally. These clients are supported by over 5,000 employees in 15 countries.

With its strong heritage and reputation cultivated over the years, PhillipCapital has grown into an integrated Asian financial house. It has a global presence that offers a full range of quality, trustworthy and innovative services to retail and high-net-worth individuals, family offices and corporate and institutional clients.

Redefining the role of the stock broker

Many stock brokers are industry veterans, who’ve served the needs of countless clients over their years in the business while they adapt to the changing landscape.

While PhillipCapital has one of the largest bases of stock brokers in Singapore, it also acknowledges the new needs of investors today. To support its clients’ holistic financial journey, the services it provides now go beyond stock trading to portfolio management, wealth management and retirement planning.

What’s the impact on both clients and the industry veterans?

Enter Project ReDefine.

PhililipCapital’s new scheme is aimed at expanding the role of the stock broker to service the myriad new needs of its clients. The expanded roles include Portfolio Manager (PM) and Wealth Manager (WM), both of which offer more value to clients.

PhillipCapital’s stock brokers now not only facilitate trades but also manage their clients’ investment portfolios and wealth their growth.

Stock brokers with PM licences can actively source for opportunities and pick winning stocks when managing their clients’ portfolios.

WM licences allow stock brokers to extend their services to insurance advice, investment recommendations and retirement planning.

For clients, the stock broker has become their go-to-person for most of their personal financial needs. PhillipCapital’s comprehensive range of solutions are meant to support them in their holistic financial journey, beyond stock investing.

The modern investor

According to a PwC report in 2020, more than half of Singapore’s total household assets were parked in financial assets.

Since 2015, household wealth per adult has been growing steadily. Average wealth remained very high at US$97,873 per adult in mid-2019. This was largely attributed to high savings and asset price increases.

Today, there are over 200,000 millionaires living in Singapore. The number of individuals with wealth (total asset value) above US$100,000 is also more than four times the global average.

According to a Singapore Asset Management Survey conducted by MAS in 2019, Singapore’s AUM rose by 15.7% in 2019 to S$4.0 trillion or US$2.9 trillion. Singapore continues to serve as the global-Asia Pacific gateway for asset managers and investors.

With increasing affluence, demand for different types investment products by the modern investor is expected to grow further.

Andy Yew is a PhillipCapital financial representative who has gone through the metamorphosis from broker to portfolio manager and wealth manager. Below is an account of his career transformation.

“I joined this company in 2010 as a stock broker. At that time, many of my friends warned me that this was a sunset industry, as everyone was starting to trade online and commissions were dwindling.”

“Fast forward to today, after many years of finding ways to add value, I managed to become the top stock broker and franchise owner. I also built an awarding-winning team at PhillipCapital.”

“The good thing about being in PhillipCapital is that we can become multi-licensed representatives, handling a swathe of products from stocks to bonds, unit trusts, ETFs, insurance policies, managed accounts, CFDs, futures, forex, regular savings plans, money market funds and more.”

“In 2019, as our business continued to grow and the industry evolved in the direction of asset management, I took the opportunity to make the next progression. I completed my dream to become a PM.”

“As a PM, I could help our clients capture opportunities in both local and foreign markets. PhillipCapital’s unparalleled access to 26 stock exchanges combined with our in-house portfolio management system, Synergy, made this possible. I could focus on investing, knowing that everything else from middle-office support to back-office compliance would be taken care of.”

“I am now able to enjoy multiple sources of income. This is important as it gives me financial security. I am not just depending on a single source of income like the traditional stock broker.”

“My passion in investment led me to a career in the financial industry a decade ago. In just a few years, it has helped me build multiple sources of passive income so that I do not have to worry about my own retirement.”

With PhillipCapital’s Project ReDefine and the new licences, stock brokers can effectively maintain their existing income streams, while multiplying them with more income sources.

If you know of any remisier or stock broker, forward this article to them. You could help shift the balance in the industry.

Know someone in the brokerage industry with a story to tell? Share their stories below!

This article was written in partnership with PhillipCapital. We’d also like to thank Robin, Thomas and Andy for their sharing.

Interested to find out more? Join our upcoming webinar, Fireside Chat with Stockbroking Veterans: History, Life Stories and the New Era, where Robin, Thomas and Andy will share their career journeys, insights and tips for navigating the brave new world of the stock broking industry.

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