Australian Investors Respond to Shifts In Broker Resources

The falling commission rates and high-quality service long enjoyed by Australian institutional investors are being threatened by mounting pressure on brokers to bring resource commitments into line with the relatively small size of the Australian market, according to a report by Greenwich Associates. The report suggests that continued reductions in commission rates are unlikely in light of the services expected by Australian investors from their brokers. ‘Australian brokers continue to be under pressure to rationalize their service model and prospects because relative to global account measures, the Australian market is simply too small to justify the commitments they have made,’ said consultant Peter Lee. ‘Australian investors, on the other hand, continue to expect service continuity despite continued pressure on commission rates, which have been declining for some time.’ Greenwich Associates interviewed executives at 47 Australian institutions for the report, which reveals that both equity portfolio sizes and commissions declined over the past 12 months. The report also examines trends in commission allocations and the concentration of institutional business among lead broker relationships.

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