GLOBAL - Low levels of commissions paid by Australian investors are under threat through the pressures on brokers of operating in such a small market.
These are the findings of Greenwich Associates, reporting on the Australian equity markets.
“Australian brokers continue to be under pressure to rationalise their service model and prospects because relative to global account measures, the Australian market is simply too small to justify the commitments they have made,” says consultant Peter Lee.
“Australian investors, on the other hand, continue to expect service continuity despite pressure on commission rates, which have been declining for some time.”
The institutional brokerage business in Australia is highly concentrated: the top two brokerages command nearly two thirds of all commissions. Greenwich notes a declining trend in portfolio size – down by 10% in 2002, while at the same time average commissions also declined. The average commission rate is 29bp, 26bp for the top 20 investors, rates which are expected to decline further this year to 28bp and 25bp respectively.
Australian equity investors devote a far greater share of commission to equity research, and a far smaller share to soft commission services, capital commitment and new issues than investors in Japan, the UK or the US.
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