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Will DBS be third time lucky in transforming its retail equities strategy?
LAST month, DBS Bank unveiled plans to transfer its retail equity trading under its brokerage arm, DBS Vickers, to the bank by year end, triggering a public outpour of support for its remisiers, including that from remisiers of rival houses.
Many lamented the bank's lackadaisical treatment of its remisiers, a reflection of its failure to value the partnership and appreciate the multiple roles they play - from credit controllers entrusted with setting clients' trading limits, monitoring margin ratios for margin accounts to underwriting and managing risks, such as, counselling clients against over trading.
Leong Mun Wai, chief executive officer of Wintop Capital and a former managing director at two local brokerages, has warned that subsuming retail stockbroking into the bank would be a big mistake, and spelt more trouble for Singapore's shrinking stock market.
This is not the first time DBS finds itself embroiled in a head on collision with its remisiers. In the early 2000s, the bank got into a public relations mess over the exodus of remisiers who were upset with the way their clients were migrated to a new online business and a commission-sharing scheme. DBS had earlier joined forces with Canada's discount brokerage, TD Waterhouse Group Inc, to create what they described as "a regional online investment services powerhouse".
DBS TD Waterhouse became an instant talking point in the broking industry after it undercut broking fees as the online platform allowed the buying and selling of shares by clients without routing the orders through a dealer or remisier. Its launch hit remisiers at DBS Vickers Securities hard as some 40,000 online customers were migrated to the new broker. DBS Vickers' remisiers also had to settle for a lower commission rate of 30 per cent, against the industry norm of 40 per cent. More than 150 remisers - over a third of DBS Vickers' 400-strong team - left subsequently, many to join rival firms.
Around the time, DBS's securities operations in Hong Kong and Singapore and TD Waterhouse in Hong Kong had a combined client base of about 37,000. The joint venture - which would initially serve self-directed investors in Hong Kong and Singapore, before extending into other Asian markets - was expected to sign up "hundreds of thousands" of clients within a few years. The venture failed to take off. Barely a year after, DBS TD Waterhouse was renamed DBS Vickers Securities Online (Singapore). But the battle for the online business continued unabated.
Fast forward 10 years later, DBS again rattled its remisiers in a bid to offer "banking and brokerage products under one roof".
The initiative was aimed at further strengthening DBS's wealth proposition. With the rollout, DBS customers would be able to tap on a team of equities specialists within the bank for advice on equities-related investment options, DBS explained. Some 10-15 remisiers ended up working for the bank, but all left within a year.
The latest move by DBS last month is an extension of what it started in 2013 - to create a one-stop shop so that customers can trade shares online via DBS Vickers Online, or conduct their broking transactions through DBS Bank, without the need to maintain separate banking and brokerage relationships.
Legally, the remisiers' clients belong to DBS. But ethically, one can argue the bank could have done more for its remisiers - many of whom are veterans "who have stuck with it through thick and thin, from the days of the Pan-El crisis, the Malaysian Central Limit Order Book saga, the Internet bubble crash, the 2008 global financial crisis and the current moribund stock market", as remisier Loh Kin Poh put it.
There are some who lament that management, with its insights to the bank's long-term strategy and industry's competitive landscape, had failed to encourage its remisiers to upgrade and nurture them to evolve with changing times and trends.
Some remisiers have complained that they were treated as outsiderswho do not belong, or that they were seen as a bunch of stubborn risk-takers.
Only time will tell if DBS will succeed this time. But past experiences have shown that it is tough merging stockbroking and banking as their cultures are very different.
DBS may be in for a rude shock if it thinks it can replace remisiers with DBS digiPortfolio, its "robo-investor" service, and risks losing the bulk of their middle income customers to rivals.
After all, client nurturing and deploying trusted financial advice are essential to any bank's success - that's something remisiers are good at.