Turbulent Markets Impact The Industry Despite Continued Growth In Spreadbetting
Quarter 1 2008 was the first quarter where the turbulent market conditions appear to have effected the business performance of both wealth managers and execution only stockbrokers.
Investment assets for wealth managers were down 5.7%. Similarly, private client funds under administration for the execution only firms reduced by 5.1%. These changes more or less tracked a fall of 8% in the APCIMS Balanced Index.
Total revenues registered a 7.6% fall, resulting in profit margins for wealth managers narrowing to 22.8%.
The market conditions impacted the execution only sector by a similar magnitude, as profit margins fell from 19.8% to 15.6%, the main cause being an 11.8% drop in trading volumes. This resulted from 600,000 fewer cash market trades, a 31.5% drop in collective trades and, in contrast, a 35.6% increase in Spreadbetting, which continued to find record high levels. Lower trading volumes and reduced asset values translated into reduced revenue levels.
On a more positive note, as the markets begin to settle, many investors are seeing it as a buying opportunity as purchase content increased to above 50% for all three mandate types (discretionary, advisory and execution only).