| Sector is booming with wind at back |
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By: Conor O'Kelly, Conor O'Kelly
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| The stockbroking industry is currently playing with the wind firmly at its back, as macro economic conditions and market sentiment remains favourable, writes Conor O’Kelly. He says that NCB’s continued focus on winning market share across the business has produced new highs in revenues and profitability for 2006. |
All engines of NCB’s business are experiencing strong growth. As evidenced by higher volumes on the Irish exchange, institutional activity remains high and the overseas client list owning Irish equities continues to grow. NCB, through our membership of the European Securities Network (ESN), has seen substantial growth in our international equity business at home and abroad. NCB’s London office opened over one year ago now employs fourteen people and has been a significant contributor to our current and future growth plans. Corporate finance activity remains strong with our team completing a record number of deals including some of the marquee deals of the year such as BWG, Airtricity and Myhome.ie. Demand for wealth management services continues to outstrip even the most optimistic expectations and this is discussed in detail later.
Challenges
The challenge in this business is always the same. People. Hiring, retaining and motivating talent is the key to success in this business. In a business that attracts strong individual personalities and a wide variety of backgrounds it’s challenging to foster a team ethos and environment. Ultimately the firms that bring that additional team ethos create an X factor that is the key to long term success. It’s also important to remember that the only place success comes before work… is in the dictionary.
The market for high quality people is always tight and the current favourable market conditions are not making it any easier or cheaper to recruit the best candidates. We continue to source talent from very diverse backgrounds and despite the tighter market candidates I don’t believe we have ever hired as much talent as we have over the past twenty four months. The firm is certainly in good hands if the quality of people recruited in the last couple of years is anything to go by.
Wealth management
The wealth management business has become a major component of all the stockbroking firms. A lot of wealth has been created in the past decade and while wealth creation is still top of most peoples list the focus is shifting to wealth preservation and passing wealth on to the next generation.
Many firms have an attitude that the best way to make money from financial advice is to give it! We disagree and believe that if the client is not making money we have no chance or right to survive.
NCB’s wealth management offering is concentrated at the top end of the market. The business is run by Greg Dilger, who is passionate about preserving the old fashioned but timeless advisor/client relationship. He puts our approach elegantly in our recent wealth management quarterly.
‘Clients want to be able to pick up the phone and talk to a human being who is competent, trustworthy and has their interests at heart. They want an independent sounding board not only for any individual product they might be considering but also on the overall investment strategy and rationale behind it… Developing relationships with sophisticated clients is a very subtle business. It requires patience and success has to be measured over an appropriate time frame. All staff performance management and remuneration policies must reflect this commitment and can not in any way incentivise short term financial gain over and above what is good for the client’.
CFDs
Contracts For Difference (CFDs) are a small portion of our business. As an instrument it is a very efficient way for clients to make a leveraged bet on the market but of course leverage works both ways! CFDs are and will remain an important tool in the private client market but it is important for stockbroking firms to exercise discretion and judgement in relation to the appropriate levels of risk for different clients.
Trends
The stocks that have appealed to institutional and private investors this year have been AIB, up 17.5 per cent in the year to date; C&C, which is up a staggering 140 per cent (our analyst continues to believe it can go substantially higher); and Kingspan has remained a firm favourite during 2006 with another superb performance, up 61 per cent in the year to date.
We have had a lot of interest in the recommendation of our No 1 rated technical analyst Richard Crossley who has made some great calls during the year. Institutional and private investors both want the same thing… ideas that make money.
New products
NCB is currently raising ?60 million for our third venture capital fund. The investment strategy will be the same as for the first two very successful funds and will concentrate on early stage development companies on the island of Ireland. The investment range will be between ?1 million and ?5 million and will be a balanced portfolio by stage of development and sector. Our funds have outperformed other European VC funds of a similar vintage and we anticipate demand from institutional and private investors. |
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