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
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Why 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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Key barriers
Lack of knowledge From my point of view its a
huge knowledge step
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Exploring the knowledge barrier
What is meant by a lack of knowledge?
Very basic knowledge required!

• Understanding of the investment jargon
• Where to invest
• When to buy and sell
• How to tell when a company is doing welland how
  to predict a future loss

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
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Lack of knowledge leads to misperceptions
Risk heightened

• 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
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To 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
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Best 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)

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Market 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 ones
  own financial future
• Positive view towards shares and the
  opportunities offered by the stock market
• 64 of investors only invest in blue chip
  companies

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Who 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 (womens magazines)
• Satrix Roadshows
• Fin24/Naspers Media partner
• Fin24 website
• Fin Week educational supplements
• Mens 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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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?

• Dont have an account?
• open one online at www.securities.co.za
• Or call 0860 121 161
• Email securities_at_standardbank.co.za
• Richard_at_standardbank.co.za