It has been an interesting week on the Irish broking scene, and one that raises a few questions about the current structure of the industry.
The back office and settlements area is very definitely the non-glamorous part of the business. It really is nothing more than one great big administrative function, albeit one that is crucially important in ensuring customers' accounts are kept up-to-date and in order. If the back office fails to do its job properly, customers will get mightily upset and inevitably move their business elsewhere.
For that reason, it was noteworthy that BCP - one of the Dublin market's middle-ranking brokers - has taken a big step in outsourcing its back office and custodial business to Wexford, one of the world's biggest stock clearing and custodial outfits.
No jobs are going, with BCP moving the back office staff into sales and call-centre jobs ahead of its move into online dealing in a few weeks. But BCP's Eamon Leonard candidly admitted that customer concerns over its back office's effectiveness had meant that BCP had lost business to the likes of Davy and Goodbody in recent years. The six-month freeze on taking on new business imposed by the Central Bank last year no doubt concentrated minds at BCP.
Current Account will not be surprised to see some of the other mid-sized brokers follow BCP's lead as contracting out the back office functions can either eliminate administrative jobs or allow a broker to move staff into revenue-generating areas.
The other big development was the way Bloxham snapped up ABN's six-strong private clients team headed up by Pat Lawless. This consolidates Bloxham's position as number three in the private clients pecking order behind Davy and Goodbody.
ABN, both now and when it was the privately-owned Riada, made it clear that it was an institutional broker and moving into private clients was only a recent development. ABN never really cracked the private, high-net-worth-clients business, so its exit from the business is not really a surprise.
ABN in Dublin has for months been a victim of a whispering campaign to the effect that its Dutch masters are ready to shut it down as part of ABN's worldwide rationalisation. The Irish operation has consistently denied that any such plans are in train, stating that the Dublin operation is part of a "panEuropean sector-focused trading house targeting large corporate and international clients".
But with trading in Irish stocks becoming increasingly concentrated on the two big bank-owned brokers, questions over the viability of ABN's Irish broking operations still linger. ABN in Dublin may be part of a pan-European operation, but with three-quarters of the market in Irish stocks apparently held fast by Davy and Goodbody, there isn't an awful lot of fee income and commissions left over for the rest of the Irish brokers, especially those like ABN, NCB, Dolmen and Merrion which have large numbers of dealers and analysts on their books.
Meanwhile, the latest Tempest/Reuters survey of 150 European fund managers on how brokers dealing in Irish stocks, market and provide their services, has produced some interesting results.
Top of the pile with more than 33 per cent of the vote is Davy, which has knocked Goodbody off its number one position. Goodbody, for its part, has slumped to number five in the Tempest pecking order with its near 25 per cent vote in 2000 slumping to less than 12.5 per cent in the latest survey.
A surprise number two in the latest list is London blueblood Cazenove where Darragh Horgan and the Irish equity team received over 20 per cent. Current Account wasn't aware that Caz had made a big pitch for Irish equities business.
Good news for Merrion which retained its number three position but increased its vote from 16 per cent to more than 18.5 per cent, while NCB retained its fourth position, at just under 13 per cent.
Last year, the Tempest survey produced totally different results from Finance's annual survey of how domestic fund managers view the brokers. Current Account awaits Finance's latest survey with great interest.
