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All is not lost for TRs and the profession
Over the weekend, a friend of mine with almost 30 years experience as trading representative (TR) complained that "business has dwindled to almost nothing''. Over the past two years, I've heard variations on the same theme - TRs turning to driving taxis to make a living, TRs earning less than cleaners, struggling to make ends meet and so on. Since there's usually no smoke without fire, I believe that there is truth to these claims - these are undoubtedly tough times for stockbrokers. Then again, this is not new.
Almost 15 years ago in August 2001, I wrote these words about the bleak outlook confronting the industry : ‘It's certainly worrying times for stockbrokers. Trading volume has been declining and commissions have been cut drastically. One dealer with 15 years in the business says a broking licence today ‘isn’t worth the paper it’s printed on’ . . . many in the industry seem to accept the view that stockbroking today is not just a sunset industry but that only the fittest will survive''.
That was written just after SGX was formed by merging Simex and SES and commissions started to be liberalised. Brokers who before 2000 earned 1% were suddenly faced with rates of around 0.4% at the time, and the unappetising prospect that rates would fall even further. In fact they have - today, the average is 0.2%. In effect, after seeing their pay drop by 60% in the immediate aftermath of deregulation, TRs have had to contend with even further falls over the past 15 years. Full sympathies then to those who have stuck it out but my point is that broking as a profession seems to have been unattractive for many years now, so the situation today is not new.
However, I prefer to try to see the glass as half full, instead of constantly focus on whether it's half empty. If we always speak negatively about something or constantly harp on a system's failings, a self-fulfilling prophecy may develop. So, is there hope? Yes - it isn't much but all is not lost. In fact I wrote about this about a month ago in a Saturday edition of BT. Since it may have escaped the notice of some readers, I'll reproduce the numbers here -
According to data furnished by the Singapore Exchange (SGX), the number of new Central Depository (CDP) accounts opened in 2015 was 18 per cent more than in 2014, while the average number of investors who made at least one transaction per month increased 4 per cent over 2014. Also, the number of CDP accounts with holdings grew 4.5 per cent to 906,294 in 2015.
In other words, despite a very testing year, there was a modest rise in retail interest and an uptick in participation in local equities which should offer hope to existing and prospective TRs.
Moreover, even though many TRs are finding it tough to make ends meet now and some are reported to be considering alternative careers, gaining a dealing licence appears to still be an attractive proposition.
Back in 1999 when the local market had just recovered from 1998’s Asian financial crisis and the devastating impact of Malaysian shares being withdrawn from Clob International, the number of TRs in the local market was 1,743, securities daily average volume (SDAV) traded was S$725 million, and commission was still one per cent. Last year, when SDAV was S$1.1 billion (56 per cent more than in 1999), there were still 3,581 TRs in the local market. This was a significant drop from the peak of 4,336 in 2011 but nevertheless twice the number in 1999.
So clearly, despite falling broking rates, increased competition and at least two (maybe three) bear markets in the interim, the local stock market still holds some attraction for retail investors, whilst the TR profession still has some appeal. There's hope yet.