Why brokers aren't extinct today. Just a different breed.
Everybody knows what happened next: technology catalyzed a revolution on the capital markets… electronic trading heralded a surge in trading volumes across various venues. Meanwhile the cost of intermediation shrank beyond recognition.
All of which, it was assumed around the time I joined the industry in 2008, would mean the rapid demise of brokerage. And yet in my view, to paraphrase Mark Twain, any reports of the broker’s imminent death are greatly exaggerated. Not to say downright wrong.
The old broker is dead, long live the new style brokerage.The somewhat stereotypical old skool broker I describe at the start of this blog — a sort of exploitation of his client’s dependence on him — if he ever existed, is probably more or less extinct now. And frankly, good riddance.
But brokerage where you can demonstrate added value for your client is starting to thrive. Which is why I believe that international niche players like ourselves at Kempen & Co, in particular, have a bright future.
Less is moreCan little guys like us add more value than the big guys? With focus… yes! Larger banks have more resources but that’s only true in absolute terms. Because a boutique is focused, we will often have twice the number of resources on our chosen niches compared to the bigger banks. We don’t have to try to be jacks-of-all-trades. This means we can concentrate on developing both a comprehensive overview and granular knowledge of our relatively small sectors. So we can give our clients genuine, original insights that can open up unique investor opportunities for them.
Is small the new big?
I’m convinced this sort of high-touch trading is the way to go. It’s impressive in a way how generalist banks manage to track what’s going on across the world’s markets and geographies: the endless flurry of activity; the constant tsunami of figures; the 1000s of quarterly reports… But in my view the concept of knowing a little about a lot is becoming less relevant. As a boutique our principle at Kempen & Co is to know a lotabout a little. Which makes us a bit nerdy, perhaps; but I do believe we’re able to add real benefit to our clients. Who form part of a growing number of savvy investors that, like us, believe in the added value of bottom-up, fundamental stock-picking. In today’s globalized, data-saturated world, if feels like boutique is a smart way to go…. Small is the new big!
This article was originally posted on LinkedIn.