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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?
                                                                            2




    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
Key barriers
                                                                                       3
                       Market trends and sentiments
 Previous company losses/market
                                                        Investment trend at the time
      performance in general

                                                               Risk heightened by
                                  Perceptions of risk          lack of knowledge
                                                               and market trends



                                  Lack of knowledge
                            “From my point of view it’s a huge
                                   knowledge step”



                                   “The risk is too high”




            Stressful, an effort and time-consuming: “Shares need constant
            monitoring whereas other investments, you sit back and relax”
     Exploring the knowledge barrier
                                                                                         4
                     What is meant by a lack of knowledge?
                      Understanding of the investment jargon             Very basic
                      Where to invest                                    knowledge
                      When to buy and sell                                required!
                      How to tell when a company is doing well
                       and how to predict a future loss

                                 Even greater need for knowledge



                          “Lack of confidence makes me feel very
                         vulnerable. Anything can happen, anyone             Yet financial
Lack of confidence                 can tell me anything”                  advisors not fully
                                                                               trusted
                        “I also feel intimidated by all the jargon and
                        you feel you have to be some accountant to
                                         understand it”

                     Greater reliance on brokers and financial advisors
  Lack of knowledge leads to misperceptions
                                                                                    5
    Perception
   that large                      Amount of money that is required to invest
 sums required
                               “Ignorance….we always think the only way to buy
                               shares is through a broker who require a minimum
     Influenced               of R600 000 investment capital….you discover later
    by lack of                             other alternatives of doing it”
 knowledge and                                And the risk involved
      market
   fluctuations                             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
To summarise research
                                                                          6




              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
Best practice field trip to Australia
                                                                                       7


   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)
Market size and drivers - 2004
                                                                                           8
   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
Who did we see
                                     9


 Comsec (leading Discount Broker)
 Fairfax Business Publishing
 ASX (Australian Stock Exchange)
Who did we see
                                                                                     10
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.
Who did we see – Fairfax Business Publishing
                                                                                                  11
 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
Who did we see – ASX
                                                                                              12
 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.
Conclusions
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 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
What have we done with this?
                                                                          14

 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
What have we done with this?
                                                                 15



    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
What have we done with this?
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 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.
What does education allow us to do?
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    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
Client Satisfaction Survey results and clients
                                                                                      18

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
What drives our revenues? – Education!
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 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.
What has education done for us?
                                                                                           20
                                                                            95%
                        Revenue and Accounts Growth                         compound
                                                                            growth pa in
                                                                            revenues
                                                                            since
                         Total Revenues                                     inception in
                         Accounts                                           1999.
                                          Education strategy started here
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Where is your money?
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                       Don’t have an account?
             open one online at www.securities.co.za
                        Or call 0860 121 161
              Email: securities@standardbank.co.za
                  Richard@standardbank.co.za

				
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