CGS-CIMB embraces disruption to chart its course

CGS-CIMB Securities is a well-known name among investors in Singapore and the region, with the brokerage boasting a large client base that relies on its services to enter the markets.

With an established position, it would have been easy for any business to maintain the status quo and focus on keeping its existing operations running.

But in recent years, the company has undergone a strategic push as it seeks to broaden its offerings to tap into a wider pool of customers and generate stickier recurring sources of revenue.

"We were trying to disrupt ourselves, and not only ourselves," says chief executive, Carol Fong, in an interview with The Business Times.

The industry veteran - with over 3 decades experience in financial markets - had observed shifts in the brokerage industry elsewhere, and recognised they would need to make changes in order to stay competitive.

Trends they had observed include the rise of low or even zero-cost brokerages such as Robinhood in the US, which they expected would eventually arrive in Singapore.

"We can't just sit around and continue with what we're doing, right," she says.

In addition, Fong notes that the industry also has a client base that is ageing, with many above 45 years old.

"Ten years on, if you don't attract the millennials coming in, you won't have a sustainable business."

Charting a path

The opportunity for a strategic shift came around 2018, when CIMB Securities International - a wholly-owned subsidiary of CIMB Group, holding the group's stockbroking business - became a joint venture (JV) after China Galaxy Securities (CGS) took on a 50 per cent stake.

With the renamed CGS-CIMB, a plan was pitched to shareholders with the idea of expanding their activities instead of being a pure stockbroker.

Key pillars were also identified, including a focus on millennials, customer-centricity, and focusing on environmental, social and governance (ESG) initiatives.

One of the products that they have launched since then has been their digital investment service platform - ProsperUs - which is aimed at younger investors and focuses on long-term investing and wealth creation.

The platform rolled out in March 2021, following market surveys of participants across Asean to identify what millennials want.

Fong notes that the younger generation differs from older clients, who prefer advice from remisiers. Millennials are more self-directed and prefer simplicity and low cost, so the company came up with the platform to address these needs.

"When we came up with ProperUs, it was with the clear view we will disrupt ourselves, even before the other fintech brokers came in," Fong says.

While it has not been long since they launched their ProsperUs platform, Fong says it has already helped pull more millennials into their ecosystem.

There has been competition coming from other low cost brokers in recent years, but Fong says they are not fazed by that as they see it as a long-term sustainable solution.

The ProsperUs platform charges a US$5 fee for trading US stocks. While other platforms may have lower headline fees per trade, Fong notes many have platform fees, and the total cost of trading could be cheaper on ProsperUs for trades above a certain size.

Apart from lowering costs, Fong adds that they are keen on financial literacy, which also ties in with their ESG focus, and they have partnered educational institutions, including Republic Polytechnic.

"We want to really engage the youth when they're young," she says, noting that there is a need to teach people to "walk before you can run" for sustainable investing.

The group plans to roll the platform out in the region - including Malaysia in the second half of 2022 - as well as Thailand and Indonesia, and faster growth could also come from these regional markets.

While their targets are focused more on profit before taxes instead of user numbers, Fong says they would have "made it", if they are able to have 5 million customers across the Asean region on the platform by 2025.

This would be far larger than CGS-CIMB's current pool of more than 400,000 retail clients, and Fong notes that some of the growth could come via partnerships with tech unicorns as well.

Beyond the brokerage business, CGS-CIMB is also entering into new activities that it wasn't able to do previously under the bank.

Older millennials may be keen on receiving more advice, Fong notes.

"We have seen some quite big ticket items come in from the richer millennials, who still like some DIY, some high touch, and that's why we created this wealth management unit."

Being able to customise solutions for customers with their asset management licence will allow them to cater to their clients' needs and Fong notes that this segment is already "growing quite quickly".

Investment banking is another area that Fong has set her sights on, with CGS-CIMB also obtaining the relevant licence to carry out such activities.

"What it means is that over time, I can do Catalist listings, for example," she says.

This could help liven up the number of listings in Singapore, which has lagged its Asean neighbours in recent years.

"Being Singaporean, I want to bring back some of the excitement to the market," Fong says.

Having a consistent flow of listings that investors can make money from would help, and Fong adds: "I think we need more players in the market, so hopefully, with us getting a licence we can add more value."

Getting buy-in

Even as the group identified new pillars and activities to focus on, an equally important element of any strategic push would be getting buy-in from various stakeholders, and ensuring that employees are engaged.

CGS-CIMB's new office at Marina Bay Financial Centre includes more areas for staff collaboration, and recreational areas.

"A lot of people are so happy to be here because it's suddenly like a big upgrade," Fong says. "For us, mental wellness is important for our employees; how do we get people to work hard, play hard."

She also encourages senior managers to be unafraid to try different initiatives.

"You don't try, you never know, but the important thing: you fail, you fail fast," she says. " You fail fast, you pick yourself up, try again."

Apart from having happier employees, Fong adds that their strategic shift has led to better results.

"The JV has actually jump-started us," she says. "We are probably doing about 5 times better than we did under the old regime and that's because we could do more business lines."

The goal is also for CGS-CIMB to be listed, and their current business already meets the requirements for an SGX Mainboard listing, Fong says.

Both CGS-CIMB's shareholders are listed, with CGS on the Hong Kong exchange, while CIMB is listed on the Bursa Malaysia.

Her preference would be to list in Singapore, where she believes they can get good valuations, and she hopes to list in 2023.

While their financials are not publicly available, Fong notes that they are doing "extremely well" on metrics, including growth, profitability, and account acquisitions.

"One must not be afraid to disrupt yourself," she says. "Just because you are doing well doesn't mean you can be complacent and expect things to continue as they are."