Web Brokers May Wane
The Age
Thursday March 15, 2001
The market downturn was likely to prompt a wave of consolidation among online brokers this year, according to the local head of Merrill Lynch HSBC.
``With volumes as they are, and talk of a recession, dependence on transaction revenue will prove unsustainable," Scott Walters, chief executive of the joint venture between the American investment house and the Asian bank, said yesterday.
``It depends on how you define them, but in this market there are around 18 online brokers in one form or another," he said. ``There won't be 18 this time in 12 months."
The online brokers likely to disappear fell into two categories, he said: those whose parent companies stepped in to shut loss-making businesses; and those who were not totally committed to an online presence.
He said Merrill Lynch HSBC had structured its fees to include a flat-rate service charge in addition to broking costs - helping to cushion the organisation from the market slowdown.
Merrill Lynch HSBC would proceed with an aggressive expansion strategy, Mr Walters said, with plans to open in up to 20 countries over the next five years.
He said the group would look at acquisition opportunities in the local market to boost its customer base. At this stage, most growth was likely to come from a flow of investors leaving the full service brokers, he said.
``The new clients that are coming on board are principally from other broking operations, many of them full service. There is a growing number of people out there who are choosing to self-direct a portion of their portfolio. With talk of a recession, this is not an environment for picking up totally new clients who have not traded before."
He declined to comment on the growth in Merrill Lynch HSBC's client base, but said it was ``encouraging".
© 2001 The Age