Self-motivation a must to succeed in risky business

PUBLISHED : Saturday, 10 July, 2004, 12:00am
UPDATED : Saturday, 10 July, 2004, 12:00am

STOCKBROKING conjures up images of great wealth made quickly, and glamorous lifestyles.

Little wonder, then, that many ambitious individuals are attracted to the securities industry, especially when market sentiment is good. And with more brokerage houses diversifying their products, the industry needs people who can advise clients on investment strategies.

Securities firms have been increasing their intake of brokers since the start of the year, now that Hong Kong's economy has turned a corner.

Kenty Wong, business development manager at Phillip Securities (HK), holds a recruitment session every month in search of account executives - the junior brokers within the company. Those with more experience can take up positions as sales and marketing managers, account managers or senior managers.

'The atmosphere in the market is quite good at the moment,' Mr Wong said. 'A lot of people are looking to enter this field from other positions. Most of our new recruits are people with work experience, including some middle-aged, former company owners who have a large social network that helps them succeed in this field.'

Dozens of aspiring brokers take part in each recruitment session. 'So far this year, we have recruited over 50 brokers, making our trading team 30 per cent bigger.'

The company plans to recruit about 50 more brokers by the end of the year.

Phillip Securities started expanding its broking section late last year. The team occupies an entire floor of the company's headquarters in Admiralty, while more space and infrastructure will be added as the team grows.

In Hong Kong, stockbrokers must hold a licence issued by the Securities and Futures Commission (SFC). But first they must pass an exam set by the Hong Kong Securities Institute, and then find an employer to support their licence application. Fresh graduates normally start as trainees, and gain their sales skills and product knowledge from senior brokers.

Higher standards are now expected of brokers, Mr Wong said, and the securities institute's exam has become more difficult as a result. 'In the past, there was only one paper in the exam. Now there are three. Many people entered the field through personal connections, but now there are open recruitment events where people considered trainable get hired.'

In addition to brokers, securities firms also need people in support positions, including 'product champions' who design and package investment products, researchers who keep track of market and product trends, as well as customer service, technical and administrative staff.

As the number of brokers increases, there is a corresponding rise in the number of support staff, Mr Wong said.

Mr Wong's position as business development manager does not exist in every brokerage house. His role is to market the company's products and recruit staff.

He worked as an imitation jewellery merchandiser before joining Phillip Securities four years ago in the settlement office which checks and reviews orders. After that, he moved to frontline marketing.

In recent years, Hong Kong's brokerage houses have diversified their products beyond securities. 'Investors have learned a lesson from the stock market crashes and now realise the importance of diversifying risks. Other than securities, warrants and futures, they are also interested in derivatives such as unit trusts, bonds and options.'

Mr Wong said some surveys found that Hong Kong investors were getting younger; the number of investors aged between 30 and 40 with a higher education was rising.

He said men were interested in derivatives in particular. 'These products are not as simple as securities, and require more analysis, which is more challenging to them.'

Compared with Singapore, where Phillip Securities' parent group was incorporated in 1975, Hong Kong still lags behind in the derivatives field.

Mr Wong said Singaporean investors were more interested in derivatives, compared with about 10 per cent of those in Hong Kong. However, the gap was closing. Clients, wherever they were, now expected more from their brokers, Mr Wong said.

'They look to brokers for market knowledge and opinions on different investment products. Placing orders via the internet has also reduced the brokers' role in taking orders. Some brokers think the internet will eventually drive them out of business, but this mindset has to be changed because as long as they can provide clients with useful advice, they will still have a client base.'

Because brokers deal with a range of investors, they are expected to be active, responsible people who are interested in the financial market.

'If you don't even bother reading the financial pages of a newspaper every day, you are not suited to this field,' Mr Wong said.

Brokers should also be presentable and enthusiastic about widening their social networks. 'They must like talking to different people and giving advice about investment plans in a responsible manner.'

Unlike salespeople in the insurance or direct-marketing sectors who are constantly searching for new clients, stockbrokers have to put more effort into maintaining a good relationship with their existing clients.

'Service is very important in this field. Brokers are expected to serve their clients independently so they will continue to receive orders from them,' he said.

Maintaining a good client relationship is essential in this industry, as most stockbrokers' incomes are based on commission.

'Some firms may provide guaranteed income for a period when the brokers first join. Some also offer medical benefits, but these are rare cases. More than 90 per cent of stockbrokers rely entirely on commission.'

Newcomers may earn as little as a few thousand dollars a month, but those with more than 1,000 clients can take home a six-figure sum, he said. Some brokers can survive on a few big clients.

Apart from having no fixed income, stockbrokers also risk having clients disappear without settling payments. In such cases, the brokers might be required to compensate their companies for any losses.

'Therefore, they mustn't take on every client they come across, but use their judgment. And they shouldn't be too hasty in pursuing success,' Mr Wong said.

Although money is the main attraction for most who enter the field, it is also the prime source of frustration once in the job. When selecting new brokers, the company will assess whether the candidates can withstand such pressure.

The securities industry in Hong Kong has been through an uncertain period in recent years. When the technology stock bubble burst, the equity market went through a quiet period which started to lift early last year. But the industry then faced another setback with the outbreak of Sars.

The number of securities firms dropped from about 700 in the mid-1990s to about 400 today. Mr Wong said many companies collapsed after Sars, mostly because they dealt only in securities. But the market has gained momentum this year under the effects of the Closer Economic Partnership Arrangement with China and increased visitors from the mainland.

An increasing number of large mainland enterprises are also being floated on Hong Kong's stock market, such as Ping An Insurance and China Life Insurance.

Qualities of successful Players

Able to advise clients on market trends and investment strategies

Active, responsible and interested in the financial market

Presentable and enthusiastic about widening social networks

Committed to maintaining a good relationship with clients

Tough enough to withstand the pressure of living on commission