Stockbrokers look to managed portfolios to unlock value

Managed portfolios are the investment tool of choice for stockbrokers looking to diversify their traditional business model and move into wealth management.

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 offer customers a broader wealth management service including financial advice.

For all three businesses, managed portfolios were a way to modernise their investment process to be cost-effective and to provide efficiencies for both stockbrokers, financial advisers and their clients.

“That’s where we arrived at the whole SMA concept and then we decided if that’s what we want to do, what is a high-quality product/technology piece to enable that to happen?” said Tim Gunning, Chief Executive Officer, Ord Minnett.

Although Ord Minnett had an existing platform, bringing in the HUB24 platform as part of the transition and with a custodian at the back-end, opened up possibilities around scalability.

“As your business grows you’ve got to be more efficient and effective in terms of how you run it right,” he said. “We have advisers who are growing in terms of numbers of clients, in terms of productivity and they were increasingly demanding these sorts of solutions.”

Patersons began its transition journey in 2009. Chief Operating Officer Jane Tandy says the business is quite different a decade later.

“When we first started, we were offering more of a bespoke, still more equities-based service and now we will be broader than that.”

She says integrating wealth management into Patersons has given it more strings to its bow and enabled it to cater for changing tastes of clients and open itself to more opportunities.

“We have also looked at things like the HUB24 platform because there is more interest from our clients in managed funds for example, whereas before it was not something we would have looked at.”

Euroz Securities also had its own platform, however the transition was an opportunity to offer greater scale and functionally as well as improved tax optimisation now possible via a Seperately Managed Accounts (SMAs).

The ability to offer a superannuation solution that could invest in direct shares but wasn’t a Self-Managed Superannuation Fund was another important consideration.

“We started down this pathway in 2014 when thought we needed SMAs – they are efficient, they are going to give us scalability of our business, and for a subset of clients they are going to achieve better outcomes in achieving their goals and objectives,” said Chris Webster, Head of Private Clients, Euroz Securities.

While Euroz Securities were traditionally strong at the investment and asset selection level, they were not so strong at asset allocation when dealing in multi asset portfolios.

“We needed a platform with a strong trading and tax optimisation engine but also a broad investment menu,” said Webster.

Read the full whitepaper here.