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Falling market share: Legacy brokers fight back with new plans & better advisory

Two years of the pandemic has brought millions of retail investors to the equity market and making their journey easy are online brokers like Zerodha, Groww, 5Paisa and Upstox.

Legacy brokers
The legacy brokers have lagged on many other counts, too, other than pricing. Some of the bank-led brokers do not offer direct mutual fund plans on their platforms.

After losing market share to discount brokers for several years, traditional brokers are fighting back. While the legacy players are still playing catch up, the game is not yet over. Two years of the pandemic has brought millions of retail investors to the equity market and making their journey easy are online brokers like Zerodha, Groww, 5Paisa and Upstox.

These players are market leaders and have way higher customers on their platforms than the traditional ones. In less than a year, the share of retail investors has hit an all-time high of 7.32% of the listed universe. Steadily, these broking firms have been chipping away at the market share of traditional broking firms that have relied on a hybrid model.

All the bank-led brokers are now putting up a fight to not only retain existing customers but even attract new ones by launching zero-brokerage products. Most traditional brokers admit that the new-age players have superior technology and easier onboarding systems, which is why they manage to attract the millennials. Vijay Chandok, MD & CEO of ICICI Securities, said, “In reality, it is about players who are digital and non-digital, and players who offer activity-based pricing vs flat ad-valorem based pricing. We have embraced digital in a big way over the last few years and continue to enhance our digital capabilities.”

ICICI Securities offers plans that have elements of activity-based pricing and have augmented it with high-value and unique propositions like E-ATM that offer instant liquidity on selling shares and mutual funds. Another product they offer is a slab-based membership plan that provides a bunch of benefits, including lower brokerage and higher E-ATM limit, Neo (zero brokerage plan) and margin funding at attractive rates through its own version of Buy Now Pay Later. It also offers proprietary research-based actionable products like 1Click baskets, among various others to attract customers. Kotak Securities, too, has a No Brokerage Plan for people under 30 years of age by paying Rs 499 a year. Jaideep Hansraj said, “The no brokerage plan will hugely benefit new to trade investors. We believe that revision of prices will bring more value to youngsters and encourage them to participate in wealth creation.”

Many bank-led brokers claim that what differentiates them from the Zerodhas of the world is their superior research and full service capability. Sandip Raichura, CEO of retail broking at Prabhudas Lilladher, said their clientele is different and their focus is on a segment that seeks advisory across asset classes with high touch servicing. However, research does not always move the needle. Pranav Haldea of Prime Database said, “In the last few years, new age discount brokers have disrupted the broking industry because of their fantastic value proposition. Broking charges are nil or negligible. I expect the trend to continue and their market share to increase. Over time, this industry too will see consolidation.”

The legacy brokers have lagged on many other counts, too, other than pricing. Some of the bank-led brokers do not offer direct mutual fund plans on their platforms. Ashish Rathi, whole-time director at HDFC Securities, said, “We at HDFC securities currently do not offer direct mutual funds on our platform, however, we keep improvising on our products on the basis of market and customer feedback. We have been advocating ETFs a lot to our customers and continue to offer to our customers wherein the risk is limited and is a very good tool to be invested in the market in the long run.” However, these brokers do offer other value-added services and support to their customers. Till then, it is advantage discount brokers.

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