online share trading – the role of education
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Online Share Trading – The Role of Education. September 2006. Richard Seddon – Head of Online Share Trading. Why do so few people invest directly in shares in South Africa?. Market in SA is very small (around 150,000 private clients accounts) - PowerPoint PPT PresentationTRANSCRIPT
Online Share Trading – The Role of Education
September 2006
Richard Seddon – Head of Online Share Trading
2Why do so few people invest directly in shares in South Africa?
Market in SA is very small (around 150,000 private clients accounts)
Most people invest in Unit Trusts and fixed deposits
There are “perceived” barriers to entry to the stock market
In late 2004 we conducted a study and best practice “field trip”
Conducted a study into the local market
Visited the most active private client market in the world
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Market trends and sentiments
Investment trend at the timePrevious company losses/market
performance in general
Key barriers
Perceptions of riskRisk heightened by lack of knowledge and market trends
“The risk is too high”
Lack of knowledge“From my point of view it’s a huge
knowledge step”
Stressful, an effort and time-consuming: “Shares need constant monitoring whereas other investments, you sit back and relax”
4Exploring the knowledge barrier
What is meant by a lack of knowledge? Understanding of the investment jargon Where to invest When to buy and sell How to tell when a company is doing well
and how to predict a future loss
Very basic knowledge required!
Lack of confidence
Greater reliance on brokers and financial advisors
Yet financial advisors not fully
trusted
“Lack of confidence makes me feel very vulnerable. Anything can happen, anyone
can tell me anything”
“I also feel intimidated by all the jargon and you feel you have to be some accountant to
understand it”
Even greater need for knowledge
5Lack of knowledge leads to misperceptions
By past experiences– With losing shares– With brokers who they perceived as being
rip-offs – high fees and expensive software packages
Bad past experiences – linked ultimately to a lack of knowledge about competitive rates and playing the market
Risk = heightened
And the risk involved
Influenced by lack of
knowledge and market
fluctuations
Amount of money that is required to invest
“Ignorance….we always think the only way to buy shares is through a broker who require a minimum
of R600 000 investment capital….you discover later other alternatives of doing it”
Perception that large
sums required
6To summarise research
The main barriers are:
Lack of knowledge
Lack of time
Perception of risk
High entrance costs
Issue more with investing in shares as opposed to it being through an online channel
7Best practice field trip to Australia
Why Australia?
Australia has one of the highest retail ownership of shares in the world
51% or 7.4 million of population owns shares either directly or indirectly
39% or 5.7 million manage their own portfolio directly via the ASX
Huge boom in investing due to:
Privatisations (Telstra, CBA, Qantas)
Demutualizations (AMP, IAG)
DIY superannuation funds
Very active exchange which is listed
Average deal size of $10k or R50k (R30k)
Average portfolio size is $41k or R205k (R209k)
8Market size and drivers - 2004
Demographics
2/5 males, 1/3 females
All age groups show significant holdings
Source of information used for advice:
Newspapers and print media (46%)
Family of friends (32%)
Internet (26%)
Financial planers (26%)
Magazines (24%)
Investor attitudes
Strong sense of taking responsibility for one’s own financial future
Positive view towards shares and the opportunities offered by the stock market
64% of investors only invest in blue chip companies
9Who did we see
Comsec (leading Discount Broker)
Fairfax Business Publishing
ASX (Australian Stock Exchange)
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Who did we see
Comsec Biggest broker in Australia with 1.1m accounts adding 1000 per week.
1 in 4 trades done on ASX are Comsec, did 28000 trades per day when we were there. 6 years ago they were doing 2500 per day.
Made $100m net profit 2004.
Clients unhappy with returns from fund managers.
Grew client base by educating masses.
Spent $2.5m (R13m) in one year, visited 800 locations and 150,000 people.
Taught them about shares – got rid of the jargon.
had night shifts at one point when their education strategy kicked in.
Do not give advice of any sort.
Key lessons
Education a great way to grow client base.
Need to keep it simple.
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Who did we see – Fairfax Business Publishing Key findings
Shares magazine hugely popular due to:
Telling what a company does
Why to buy the company
Use of basic language
Simple style of writing
Most successful business publication ever in Australia and one of most success in world based on a per capita basis
Readers moved along the education curve moving on to more advanced topics.
Shares noted in magazine ended up moving the market
Helped to educate the market
Key lessons
We should partner/sponsor stock market education with media.
There is demand for basic investment materials
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Who did we see – ASX Key findings
“Wealth begins with better knowledge”
Education a big priority of the exchange (retail, fund managers, brokers and media)
Drives up transaction volumes and liquidity
Education budget is $4.5m (R23.5m) per annum.
Have seen a 10 fold increase in the number of retail trades in the last 3 years
Retail trades make up 55% of all trades on the ASX
Key lessons
Face to face most effective but online has value as well.
We need to cover the basics.
Also educate the media.
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Conclusions
There is massive potential for success in SA through education
Need to grow the market in SA - it has been done in Australia
Education is the way forward as confirmed by trip and our own research
Demystify the market
Get clients to trade shares then grow them into more sophisticated products over time.
Concentrate on selling the market
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What have we done with this?
Set up education as our differentiator
Provide free one hour presentation to the public on the basics
Run the following courses for our clients: The basics of investing on the JSE
How to use the website
Technical analysis for beginners
The Truths of the Market and Trading Skills
Investing using Fundamentals
Practical / Advanced Technical Analysis
Warrants and Share Instalments
Single Stock Futures
Online courses of the above
Most courses are free or minimal charge
Sponsor “Investing 101” in conjunction with the JSE on Radio 2000
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What have we done with this?
Work with JSE: Company presentations (Altx, Mining, Property)
Provide trading platform for JSE Investment Challenge
Focus on women roadshows (women’s magazines)
Satrix Roadshows
Fin24/Naspers – Media partner Fin24 website
Fin Week educational supplements
Men’s Health and other magazines
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What have we done with this?
Addressed the high cost of investing .
Automatic Share Investment (ASI). This is a once per month direct debit/saving product that allows people to "save" a minimum
of R500 into a choice of 20 different shares (minimum of R500 per share selected per month).
The shares will be a selection of to 40 shares plus Satrix.
Cost R20 plus 1% inclusive of all costs
We see that this product will allow us to significantly grow our client base over the long term.
We will use this as a way to grow clients into our full offering over time.
Product endorsed by the JSE as helping the man in the street to gain direct access to the JSE at a low cost.
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What does education allow us to do?
Help clients make good investments
Clients trade more frequently when they are confident of their decisions
Teach clients to place stop losses to play another day
Help clients to use our website
Move clients to more sophisticated products such as share instalments, warrants and single stock futures which have higher margin
Get face to face feedback from clients
Get loyalty from our client base – will recommend to friends
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Client Satisfaction Survey results and clients
Conducted our annual survey of clients in 2006
•Results:
•81% rate us very good to excellent
•98% rate us good to excellent
•Clients are very loyal with 88% “very likely” to recommend us to a friend
Client Leads come from:
•Friends recommendation – 25%
•Fin24 – 20%
•Standard Bank Homage – 18%
•Internet Banking – 17%
50% of our clients have never invested in shares before
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What drives our revenues? – Education!
The biggest driver of the business is brokerage revenue and number of trades.
This makes up the bulk of our revenues but is also one of the biggest contributors to costs.
Education helps clients to make the right decisions and stay a client.
Second biggest driver is number of accounts.
This impacts on the number of trades (more clients equals more trades) but also the monthly annuity income that is generated from our administration fee per account.
Education help us retain our clients.
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99 Apr Jul
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Total Revenues
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Revenue and Accounts Growth
What has education done for us?
95% compound growth pa in revenues since inception in 1999.
Education strategy started here
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Where is your money?
Don’t have an account?
open one online at www.securities.co.za
Or call 0860 121 161
Email: [email protected]