
Premium league customers
The year 2013 was an extremely good one for the domestic capital market, which saw an increase of 26% of BET, the maximum of the last six years. Developments will depend to a consistent extent on foreign markets, and the macroeconomic situation in the country. Brokers say that it also depends on the appetite and financial strength of investors. And last but not least, the trust relationship between the personal consultant and the person who wants to invest money efficiently.
With a portfolio of at least 100,000 euros, a “player” on the stock market often knows what he wants. However, sometimes money gives you confidence, not necessarily understanding. And suddenly being a broker becomes challenging, but can also bring satisfactions. Mihai Mureșian, trading director at Intercapital says that big brokerage houses do not usually contact directly so-called premium customers. Especially since trading on Forex, the perception about the stock market and the ones who represent it has become a little shallow. “We usually do not to contact new customers especially since there is an inflation of advisors on the Forex market. These brokers are constantly contacting all kinds of people with money and the potential clients became reluctant when they hear about the stock market. The potential client automatically thinks of Forex, therefore speculation, therefore risks” says Mihai Mureșian. As a result, a well known brokerage house waits for significant clients and their relationship begins to build up from the first meeting.
In 90 % of cases, the first meeting is an exploration one with lots of questions to understand how the brokerage company works, the commissions and other technical issues. In the next meetings, the transaction fees and the type of services are negotiated, which in turn can be commissioned depending on each company. Then the trading account is opened. “There are premium customers who want to be contacted regularly, weekly or monthly, only to be made aware of their portfolio situation. Some will be contacted daily. There is no template. But there must be a close relationship with the broker; he must be reliable and secure exactly like a bank” says Mihai Mureșian. How to reinforce the relationship of the two? Through regular meetings usually in selected places or in business meetings at the client or at the brokerage house. But a good consultant is different from the common one with the ability to know their customers, anticipating wishes and thoughts. That’s because the transactions are based on the customer profile. “Some people are reluctant to risk, will not invest in uncertain companies, oscillating stocks and the broker must recognize such individuals and choose suitable investments. Or conversely, there are customers who like risk and then the broker should choose the right portfolio” says Mihai Mureșian. The broker should differentiate between the two types of investors because basically, everyone says they want to gain as much at a small risk. Investors rarely say they want to risk, even if they have the profile and appetite for it.
Aside the broker a premium client has a dedicated person who is always available for him. “Sometimes, you must be available at 2 am, because some customers will also deal on international markets” admits the Intercapital trader. What other more benefits could have a premium customer? An online secure account where he can “deal” as he wants. Then have access to all company reports, market analyzes and other documents which show the company’s activity and address the client’s interest.
We are going ahead and we are making an imagination exercise with Mihai Mureșian. What would he recommend to a client with a portfolio of at least 100,000 euros? “At this time I would recommend to invest between 75 % and 85 % of the portfolio in the stock market. The potential is huge. At the current price levels, taking into account the macroeconomic situation and deposit interest rates, I think the Romanian capital market has potential in the short and medium term”. But what if a customer is less confident or a novice? He would start with a quarter of the portfolio to see how things work, so the “player” could become familiar with the market, discover dividends, as well as receiving them and understand how decisions are made in a company”. For the most cautious I would go up to a quarter of the portfolio, but in normal cases I’ll go for 75 %. Transactions are not made quickly though. If we speak of a portfolio of millions, of which nearly 70 % is invested in the market, we are talking about transactions made progressively over a period of weeks to months” explains Mihai Mureșian.
It somehow becomes clear that there isn’t a defined profile of the premium customer in Romania. Some of them need money and sell their assets; others receive large sums of money and increase their portfolios.
However, one thing is certain: a premium or super premium client must have an average portfolio of 500,000 euros. And “players” are everywhere. “We have premium customers from Transylvania , Banat, Moldova, Bucharest. Women and men, but usually men, about 50 years old who travel a lot. Men are the ones who take more risks. Most of them know already what they want”says the Intercapital consultant.
Regarding the investment options of a premium client, here comes into play the broker strategy, which is based on market conditions, but also the client’s profile. “I would rather recommend investing in companies and in those companies which you can understand. I know it’s fashionable to invest in futures contracts, in large companies worldwide, in companies that have a sounding name. But, if the investor cannot understand his investment (the company), does not know the economic flow of the company, the prospects of the business and the macroeconomic environment, we only recommend a marginal investment. And, I would recommend to invest his money where he understand the business” says Mihai Mureșian. But he says there is no rule.
There are premium customers who live half of the year in Romania and the other half in Switzerland, Germany or France and so they are familiar with the situation there. Consequently their portfolio is diversified on those markets”. We provide access to all world markets, but of course the Romanian market is the one we give the utmost importance,” mentions the Intercapital representative. He believes that 2014 will be a good year, with a growth close to the level of 2013. The market has already substantial capital inflows compared to recent years and it will further attract investment because the alternatives are restricted and deposits no longer offer the same returns. Moreover, the year will bring new listings, especially in energy. So, there are opportunities even for the most sophisticated customers.