Brokerage Management Changes: Embrace Active Management, Public Collection Into The Fast Lane

At the beginning of 2020, the scale of securities business management was 9 trillion and 350 billion. In the first quarter of 2017, the figure was 18 trillion. In the 3 years, the size of broker management was nearly cut.

Behind the decline of the scale is also the dilemma of the development of the industry. Where is the way out for the securities companies to manage channels? With the large collection of securities management information products, "public collection", the development direction of securities management is becoming clearer. It will be the future trend to embrace active management and lay out public offerings.

The figures also support this trend. In 2019, the public offering business for the first time exceeded the channel business.

"Previous channel business is too easy, most brokerage firms have no active management genes, but with the change of policies, securities companies should go in the direction of active management in terms of personnel structure, resource tilt and management concepts. Although it is very difficult, some brokerages may not be able to make sustained investment, but they want to be reborn, and even become the core of the big wealth management of securities companies. The head of information management business of a medium-sized brokerage firm in Southern China thinks.

Scale change

In 2019, it was a year of cold winter for brokers. According to the unaudited financial statements, 133 securities companies achieved operating income of 360 billion 483 million yuan, net profit of 123 billion 95 million yuan, and 120 brokerages realized profits.

From the point of view of the sub item business, the securities companies were fully blooming in 2019, and all businesses had a good growth rate, but the information management business was an exception.

Data show that as of December 31, 2019, the total amount of principal funds entrusted by the securities industry was 12 trillion and 290 billion yuan, compared with 14 trillion and 110 billion yuan in 2018. Although not all trustee management funds come from brokerage management business, most of them are contributed by brokerage firms, which has dropped by 1 trillion and 820 billion in one year.

From the point of view of revenue, the net income of brokerage assets management business in 2019 was 27 billion 500 million yuan, although the figure was unchanged from the previous year.

According to the latest data, the size of broker management is still declining. Data show that as at the end of January 2020, the scale of information management of securities companies and capital management companies was 9 trillion and 350 billion yuan, a decrease of 2%.

It is worth noting that since November 2019, the size of the securities brokers' management has dropped to below 10 trillion yuan for the first time, which has been less than 10 trillion yuan for the third consecutive month, compared with the highest level of 18 trillion and 770 billion yuan in the first quarter of 2017.

In response, a financial regulatory Research Institute pointed out: "before 2016, the main reason for the rapid growth of asset management scale of brokerages was mainly regulatory arbitrage rather than the actual growth of financial demand. Channel business does not create value in real terms, nesting the risk chain and increasing the difficulty of supervision. After the new regulation of information management, the supervision of the operation mode of the traditional channel business is totally halted. Since then, the single management plan business has been out of business, and the demand for channel business has been greatly reduced. However, the cost of managers' performance has been greatly improved, and the business of purely evading supervision can not pass the compliance audit, and the economic efficiency is low.

Obviously, since 2016, the regulatory authorities have introduced a series of policies such as reducing leverage and going to the channel, and breaking the rigid payment, regulating capital pool business and guiding the industry to nesting after landing the new regulation of the 2018 capital management.

But over the past few years, the focus of reinvention has been on the scale of business. The channel business is still the absolute leader in the scale of securities business management. Therefore, the continuous decline of channel business scale makes it more difficult for the broker business. The change of scale is the predicament of securities business management. What is the direction of reshaping the business structure of securities firms?

In 2019, the change of the data of the brokerage business management revenue data gave the direction for the industry to find the answer: the broker information management and public offering business is gradually coming to the stage.

Embrace active management

From the data in 2019, the change is coming quietly.

According to the Securities Industry Association's data, the scale of the fund raising business of the securities companies (including large collections) in 2019 is 10 billion 200 million yuan, accounting for 37% of the total income. In the past, the main asset management business was 10 billion 34 million yuan, accounting for 36.47%.

"From the scale and proportion of income, the change of public offering business and channel business in 2019 is a slip of the tongue. But behind this subtle change is the changing trend of the industry. With the continued decline in the size of the channel business, the public offering business of the broker management is stepping up. Mid level evaluation of a medium-sized brokerage firm's information management business in Beijing.

The real strength of the public collection and management of securities business is derived from supervision and promotion of the transformation of large brokerage firms.

In November 2018, the SFC issued the guidelines for the application of large collective asset management business of securities companies (hereinafter referred to as "operation guidelines"). The "operation guidelines" stipulates that the large scale asset management business of the stock should be managed by the standard public fund, with a deadline of December 31, 2020, and a clear guidance for the transformation operation during the transition period.

Although the scale of the channel business is still there, it has actually died, and now there is no increment, and the scale of business and the scale of revenue continue to decline. In addition, channel business is not the direction of supervision and encouragement at present. There are many restrictions to be done. No broker management is willing to do channel business. At that time, the large collection was transferred to the public sector, and the head office started to try. Southern China securities dealers said.

At the same time, there are also market participants believe that the securities management information from the public offering business has its advantages.

"At present, there are more than a dozen brokerages funded by the public fund license. The management of securities dealers can make full use of the advantages of the license of the public fund business, reduce the sales threshold, and make further large-scale efforts to obtain a more stable management fee income through making good public performance. In addition, at present, the sales threshold of some products of banks and trusts has dropped very low. If the broker management information products are still hundreds of thousands of threshold, it is impossible to compete in the market, and the transformation of public collection can solve the problem of investors' investment threshold. " The analysis of Beijing securities dealers pointed out.

What surprises the industry is that the first public offering products have been reacted well in the market. For example, the public offering products completed after the transformation of CITIC information management and national management information system are very good.

"The first batch of brokerages" large collection of products "public participation in the transformation of" hot ", has a strong exemplary role. Regulators have also encouraged brokerages to issue such products. At present, approvals have been speeded up, including Haitong Securities Management, Changjiang Securities Management, Shen Wan Hongyuan information management, and a large collection of products of Xing Xing information management has been approved by the transformation, and a new wave of issuance is expected soon. A person in charge of the information management business in the Beijing area said.

On the basis of the public offering business, the head broker's information management business has begun to exert itself in active management. For example, the investment management system improves the pedigree of star FOF products, and actively distributes various types of fixed income net value products. CITIC management insists on the overall development thinking of "foothold in the organization and giving consideration to retail sales", and pays close attention to the growth of the scale of retail business, especially the high net worth individual customers.

However, at present, the rapid turnover is still the head broker of "big family and big business". Many small and medium brokerages are unable to embrace active management because of the problem of gene and resource endowment, or unable to invest continuously in active management. However, at present, the head broker has pointed out a path that can be adhered to for the securities and information management industry.

Qu Qing, vice president of Jianghai securities, also pointed out that along with the new regulation of information management, the business has not been as large as before. However, the field of information management of securities companies can still subdivide many small areas. "Small and medium-sized brokerages should concentrate their strengths to make their own characteristics, not to be comprehensive, but to be more sophisticated and professional in a certain field. At present, some small and medium brokerages do have more professional and market influence than the big brokerages in a certain area of information management.

Rush to increase

Going to the channel and embracing active management is undoubtedly the mainstream route of securities management in 2020. But in 2020, there is also an important business opportunity to participate in listed companies.

In February 2020, the SFC issued a revised refinancing new regulation, revising several core provisions such as pricing, lock up period and so on, allowing market funds to participate in the expected increase in earnings of listed companies.

According to the calculation of the institution, the fixed price increase date will be changed from the first day of issue to the date of resolution of the board of directors, the resolution date of shareholders' meeting or the first day of issue. This means that the fixed price increase can be locked ahead of time, and the base price will be changed from 10 percent off of the average stock price of the 20 trading days before the benchmark price to 20 percent off. Therefore, for the fixed price increase, only considering the contribution rate of the discount rate (generally the base price), the annual yield can reach 16.7%.

And the fixed price increase is still the first day price of the issue period, but the bottom price discount will be changed from 10 percent off to 20 percent off, and the lockup period will be changed from 12 months to 6 months, and the attractiveness will also increase significantly.

Based on such a revenue expectation, the securities companies moved quickly. As a matter of fact, in the golden age of the last round of listed companies, brokerage management has benefited a lot. Some of them focused on the increase in securities management and once formed business characteristics.

For example, the information management system is the largest investment management agency in 2015. Its stakeholders told reporters that participation in the increase was the focus of the company's business this year.

The company has a scale of about 1 billion yuan, and it is preparing to increase its participation in listed companies. The first fixed collection product issued by the company for high net worth customers has also been launched in the sales channel.

Reporters also learned that CITIC Securities, which is ranked top in information management business, is speeding up its layout after the new regulation. It will continue to track the advantages of the market in recent years and participate in the fixed growth projects as soon as possible.

"There are multiple advantages in the participation of securities dealers, and the investment and research system of brokerages and investment banking resources can enable brokerages to better acquire and determine the resources of fixed projects." The Beijing securities broker told reporters.

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