I just like to share my thoughts on this matter. The first thing I like to say is that remisiers' income, like that of the stockbroking firms and stock exchange company (i.e. Bursa Malaysia), fluctuates & moves in tandem with the sentiment in the stock market. In the present bear market, when investors and traders are not more willing to take on more risk, the trading volume and remisiers' income would naturally decline. It is very normal and nothing to fret about.
Zero brokerage is a totally different thing. However, it must be noted that zero brokerage schemes offered so far are for a limited period. CIMB's Clicks Trader's promotion is valid from Jan 9 to March 8 only. The report did not mention about Kenanga's 2EC account, which is a negotiable trading account. As currently practiced in 2 branches in Petaling Jaya (up to February 17), Kenanga's 2EC account offers zero brokerage rate for the buy-side contract, but attracts normal brokerage rate for the sell-side contract. This effectively offers the clients a 50% discount to the normal brokerage rate. Certain terms & conditions apply, such as cash upfront, etc.
Zero brokerage rate is not sustainable. One of the first online broker to offer zero brokerage rate in US is Zecco and it is finding it very hard to make money. Clusterstock has this story about how Zecco is changing its current practices in order to survive (go here). A copy of the letter it sent to clients, informing them that it would no longer be so generous (emphasis are mine) is given below:
Dear Zecco Trading client,
I’m writing to tell you that as of March 1st, 2009, we’re increasing the minimum level of assets needed to earn 10 free trades per month to $25,000. We’re also adding a new way to get free trades: customers who make at least 25 total trades per month will also qualify for 10 free stock trades per month.
Additionally, as of March 1st, 2009, you’ll be able to earn $75 for each friend referred to Zecco Trading through our Zecco Friends program. You can use that cash to offset trade commissions or make new investments.
Why was this necessary now? Anyone who’s read a newspaper lately knows that the US and world economies have been hit hard over the past 4 months. As a result, some of the largest corporations in the world have had to cut costs and adjust to new business realities. With reduced retail trading volumes and lower interest rates, we at Zecco Trading simply could no longer provide free trades to as many people as we would like.
To quote Mark Twain who said "Rumors of my death have been greatly exaggerated!", I would assure one & all that remisiers will still be around. To be relevant, we remisiers must strive to improve our service to our customers.
4 comments:
not dead but half death...
sounds like some broking houses are determine to cause the death of remisiers? Can someone please let the broking houses know that they are barking up the wrong tree?? As for striving to provide better services, i think clients are a pampered lot nowadays and remisiers try too hard.
Hi Fairies,
My personal experience is that most clients are quite reasonable. While most of them would like to enjoy lower transaction cost, they are aware that there is no such thing as a free lunch. If the brokerage rate dropped too much, their remisier will not be available to service them any longer.
Whether the level of service currently rendered by the remisier and the broking firm commensurates with the brokerage rate is something that the parties concerned will have to assess. There are instances where a remisier did a lot of work only to be compensated by a small commission (flowing from a small order). There are also instances where a big order came in where the remisier merely passed through the order and earned a big commission. So, there is no hard & fast rule.
With financial liberalization & the advance of the internet, remisiers must do more in order to earn their keep. They must upgrade their knowledge & skill as well as their level of service in order to assist their clients. While many remisiers are constantly improving themselves or their service level, some chose to hide behind a narrow & strict interpretation of the law, which supposedly forbids them from advising their clients. I do not share such sentiments. The fact that a remisier need to have a certain level of knowledge & skill before getting their license as well as constantly enhancing their knowledge & skill (thru CPE courses) is a clear indication that the authority expects remisiers to have a certain level of competency and to apply it in servicing their clients. Only by doing so would remisiers remained relevant in today's world.
Hi Alex
Very well written article. Would you mind to share what are the added services a remisier provide to their customers?
Do they manage clients' portfolio just like what a fund manager does?
My remisier picks up my call when I want to place order, and return call to me once order is done. He is just an order taker. Are those the only services we get for the additional brokerage (compared to online trading) we pay? Appreciate if you could share your view. Thanks.
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