First NZ Capital eyes wider product offering with Direct Broking deal

Tuesday 21st November 2017

First NZ Capital will test the waters with customers about what products it should be offering with its new foray into direct wealth, says chief executive James Lee.

The Wellington-based broking and research house has agreed to buy ANZ Bank New Zealand's online trading platform for an undisclosed sum, developing a distribution relationship with New Zealand's biggest lender. FNZC will return the platform to its old Direct Broking name as it seeks to develop a footprint into a new space for the firm.

The deal is expected to close in the second half of next year, with NZX and Financial Markets Authority approval needed to transfer licences, and FNZC plans to go to its own customer base to see what services they want to be able to access through the portal. FNZC plans to enhance Direct Broking's trading capability with its existing services and is looking at investing in the platform to meet that customer demand.

"It's really trying to think about how do we provide direct access to the market to a wider group of investors," Lee told BusinessDesk. "That might be broader markets offshore than just New Zealand and Australia, it could be products other than just equities and fixed interest, and how that plays into providing things like robo-advice and so where people actually need advice."

Lee said developing the wider market for direct wealth was identified as an area worth further investment by the Rob Cameron-led Capital Markets Development Taskforce, which made a series of recommendations to the government in 2009 to support the capital market. Combining ANZ's platform with FNZC's skills was a "reasonably natural" fit and should go towards developing that part of the market, he said.

The firm's new direct wealth unit will be headed by Fiona Mackenzie, who's been in charge of external investments at the New Zealand Superannuation Fund and was a former head of strategy at NZX.

FNZC's expansion into direct wealth comes just days after NZX unveiled a new strategy to reinvigorate the country's capital markets in a year where a lack of initial public offerings has seen the stock market operator criticised for not doing more to spur new listings. The crux of the new NZX strategy is a return to its core business of operating the market, which FNZC analyst Greg Main described in a note to clients as being "very high level and aspirational with few tangible takeaways".

Main said key issues for NZX are liquidity, products and issuers, and participants, which are interrelated and either support or undermine each other, depending on the circumstances.

"For liquidity, NZX noted its trial to facilitate electronic flow with lower pricing for three direct market access (DMA) clients has increased volume, although from the outside looking in, it is difficult to tell if this is real net volume growth, growth in volume of the DMAs or some other factors," Main said. "We remain of the view that for NZX to lift the proportion of on-market trading, for which it receives a benefit, there is likely to be some form of lower return in trading fees received."

(BusinessDesk)

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