NAB is set to give online traders more choice, writes John Kavanagh.
The online share-broking business has been hit with a healthy dose of competition from a self-styled "attacker" brand keen to grab a substantial share of the market. Online broking is already a competitive market, with established providers continually revising their costs and introducing new services. A new attack on the market promises even more benefits for investors.
The surprise is that the attacker is National Australia Bank.
Its old service, NAB OnLine Trading, had a small market share compared with its big bank rivals, such as Commonwealth Bank's CommSec and ANZ's E*Trade. NAB has launched a new service, nabtrade, with sharper pricing and new services.
The group executive of MLC & NAB Wealth, Steve Tucker, says nabtrade was built on a new technology platform that is integrated with the bank.
This will allow NAB customers to move their money in "real time" and allow the bank to provide a wider range of services when they log on for a trading session.
Tucker says NAB's platform will "leapfrog" all the other online trading systems in the market.
Research company Investment Trends estimates that there are 615,000 active online share traders in Australia (active means they have traded at least once in the past 12 months). It estimates that there are 49,000 frequent traders, who trade at least four times a month.
Investment Trends says CommSec has 49 per cent of the market, E*Trade has 18 per cent, Westpac Online 9 per cent, Bell Direct 6 per cent, NAB OnLine Trading 4 per cent and CMC Markets Stockbroking 4 per cent.
With the volatility in the sharemarket over the past few years, online broking has been tough.
Investment Trends estimates that the number of frequent traders (who generate a lot of the profit in this business) has fallen from 63,000 at the end of 2010 to 49,000 today - a 22.2 per cent drop.
NAB's pitch to share investors is a reduction in its brokerage rate from the previous base amount of $29.95 a transaction to $19.95.
It has also added new
The general manager of nabtrade, Nathan Walsh, says NAB customers will find the integrated service fast and convenient. He hopes to attract new customers with the quality of nabtrade's research.
"Our market research told us that investors are looking for a better research offering, both in terms of the breadth of the research and ease of use," Walsh says.
Nabtrade carries research from a number of sources and has what it calls a "smart consensus", whereby a team of NAB researchers consolidates the research to provide consensus recommendations.
A tool known as Global Scanner allows investors to set up their investment objectives and have the system search for opportunities based on those objectives.
The system also has tools that allow investors to track their total asset position across multiple accounts, and tools for stock comparison. "Investment research is not an easy process and we have added these tools to make it more intuitive," Walsh says.
Two years ago, E*Trade launched a tax-reporting service that brings together trading records and capital gains and losses in a form that can be used to complete a tax return.
The head of online and direct markets at ANZ, Matthew Loughnan, says this has been a popular feature. E*Trade has enhanced the service with a premium offering that allows investors to create scenarios before they trade, so they can calculate the tax outcome of their buy or sell.
E*Trade has also developed its international share-trading service (which covers 11 markets), so that investors can buy and sell overseas stocks on the same screen where they trade local stocks.
CommSec has pushed into mobile services, launching smartphone and tablet apps earlier this year.
The general manager of customer experience at CommSec, Richard Burns, says 100,000 customers have downloaded the apps and mobile trading now accounts for about 5 per cent of turnover.
CommSec has also launched a YouTube channel, which has had 50,000 views over the past two months. Economists and analysts are interviewed on the channel, offering market insights.
The managing director at Bell Direct, Arnie Selvarajah, says that since the 2008 bear market, investors have become more demanding about the quality of research that online brokers offer. "People are sceptical and trust is lower," Selvarajah says.
Bell Direct has introduced Bell Potter stock research and a suite of analytical tools that allow investors to create strategies, put stock filters in place and draw on charting and other technical insights.
Selvarajah says: "The research tells us that price is the No.1 determinant of customer satisfaction.
"That is followed by the quality of research, tools, tax reporting, ease of use and the reliability of
Bell Direct targets frequent traders with a facility that allows them to send orders in bulk.
CMC Markets Stockbroking has introduced Linked Orders, which allows an investor to place an order with an entry price and an exit price to put a stop-loss strategy in place, as well as a tax reporting service.
Brokerage: costs come tumbling down
Price-sensitive investors will be pleased to see that strong competition in the online broking market is exerting downward pressure on fees. In a survey of the online market published in April, the investment research group Canstar reported that average brokerage for a $10,000 share trade executed online had fallen from $22.67 in 2011 to $21.07 this year, a seven per cent reduction.
Canstar rated CMC Markets Stockbroking the best value for money. CMC charges $9.90 or 0.1 per cent of the value of the trade (whichever is greater) for an online trade of any size. For telephone transactions it charges $59.95 for trades worth up to $20,000, $82.50 for trades worth between $20,001 and $37,500 and 0.22 per cent for trades worth more than $37,500.
Bell Direct also offers a highly competitive pricing structure. The first 10 trades each month cost $15 each or 0.1 per cent (whichever is greater). The next 20 trades cost $13 or 0.08 per cent, and from 30 trades per month onwards the cost is $10 or 0.08 per cent.
With the launch of its new online share-trading service nabtrade, National Australia Bank has dropped its base brokerage rate from $29.95 to $19.95. The charge is $19.95 for trades worth up to $10,000, $29.95 for trades worth between $10,001 and $27,227.17 and 0.11 per cent of the value of the transaction for trades worth more than $27,277.17.
CommSec charges $19.95 for trades worth up to $10,000 and 0.31 per cent for trades above that value. Phone trading starts at $59.95.
For the first trade each month, E*Trade charges $19.95 for trades worth up to $5000, $24.95 for trades worth between $5001 and $10,000, $29.95 for trades worth between $10,001 and $28,000 and 0.11 per cent for trades worth more than $28,000. For the second and subsequent trades each month it charges $19.95 up to $18,000 and then 0.11 per cent. Telephone trades start at $69.95.