Lessons learnt: Transitioning from stockbroking to wealth management

The differing fee structures of stockbrokers and financial advisers needs consideration in a business model where the two services are being combined to provide wealth management.

And once you find the right mix, you need to be able to communicate it to clients.

“They’re comfortable with transactional brokerage because they feel like they are only paying you when a change to the portfolio occurs,” said Chris Webster, Head of Private Clients, Euroz Securities. “They are resistant to moving to an ongoing fee arrangement even if quantum of the ongoing fee works in their favour.”

Meanwhile, on the advisers’ side, they are similarly uncomfortable with trying to charge clients an annual fee as opposed to a transaction-based brokerage fee.

“The platform fee is the easiest to explain you are going to get full custody which leads to great reporting with a great trading engine through the HUB24 platform,” said Webster. “The harder fees to discuss are adviser remuneration and then the charges of the actual fund manager themselves.”

In a whitepaper commissioned by HUB24, ‘The Stockbroker Revolution: A new era of business transition’, three established Australian stockbroking firms – Patersons, Euroz Securities and Ord Minnett – detail their journey from pure stockbroking to offering customers a broader wealth management service including financial advice.

Appointing the right personnel was a key challenge for Patersons who chose to make a few management changes internally and to identify advisers already doing wealth management themselves who were happy to work with other advisers to give them guidance and direction.

Selecting the right systems that could support the staff in the new model was crucial.

“You need to have the right staff and you need to have the right systems,” said Jane Tandy, Chief Operating Officer, Patersons. “You can’t just force a bunch of brokers to be something they are not.”

While Ord Minnett has funds on its own platform, the ability to execute changes for multiple clients in a more efficient way was unsurpassed on HUB24.

“There is no doubt that the functionality which we saw in the HUB24 platform was quite different, to be frank, to what we’d seen before. It had a custodian at the back end,” said Tim Gunning, Chief Executive Officer, Ord Minnett.

Meanwhile, Euroz Securities needed an efficient way to buy and sell managed funds to compliment clients existing portfolios and transition them as required.

To do this they used the HUB24 platform. Euroz Securities had been working with Agility, part of the HUB24 Group, for its broking solutions and it found HUB24 was better able to understand its stockbroking needs.

The integration of systems is important in this sort of business transition because it is effectively bringing two different services together under the one roof. Picking up an off-the-shelf advice solution and expecting financial advisers and stockbrokers to be happy, is a stretch.

Read the full whitepaper here.