The convenience store

Managing Director Stuart Sayers says E*TRADE's main focus is providing

its customers with convenient and relevant online trading solutions

By Charis Palmer

February 11, 2010

OBR: Stuart, you've been in your role as managing director of E*TRADE for a little over 12 months now. What's been the most enjoyable part of it?

SS: There are lots to choose from, but if I had to pick one thing I'd say it's the people here. There's just over 200 people at E*TRADE and they are all deeply passionate about online trading, and that's a fantastic thing to be part of. It's great to be in a position where we have the flexibility of a 200 person size company but with the weight of an ANZ behind us.

OBR: You took on the role at a time of strong market uncertainty. How have you helped guide E*TRADE through this period, and what are some of the lessons you've been able to take away?

SS: Firstly, good strategy survives shocks. We've had for a long time a strategy of trying to provide convenient, easy access to the financial markets and particularly to make available to retail traders and investors things that were only available to institutions.

The second thing was the absolute supreme importance of the link to the customer. We picked up a lot of customers last year who had been full service broking clients and what we were hearing anecdotally is that their broker wasn't talking to them. It's understandable, it's a tough conversation to say: "Hey, you've lost 30 per cent of your wealth", but I think what those people didn't think through was the customer wasn't just sitting there waiting for them to call.
Thirdly just to use that time to invest. We probably put more money into the platform last year than previous years because what goes down will come up, and we've already seen that. January last year, my first month in the job, was the worst volume we've ever had, but then August, September and October were the best months we've ever had by 15 per cent.

OBR: Now that investors are returning to the market, are you seeing more self-directed activity and, if so, from which group of investors?

SS: The short answer is yes, and pretty much across the board. In terms of what we saw and what we continue to see, everybody took a pause when the market dropped a year and a half ago.

What was apparent to us was the active retail traders were the first people back into the market, en masse, for us. They were typically buying in January, February and March. Then the more retail investors started coming into the market in April, May and June and then we also have a wholesale part of the business and we saw that start to pick up.

Overlaying that we also saw a shift from clients who used to use full service brokers either shifting holus bolus and doing it all themselves or at least starting to do some of their trading themselves, to avoid paying that high price for every trade.

It's amplified a trend that was already there, which is more customers moving to self-service and doing things online. We see it in online banking within the bank, and we see it within E*TRADE.
This time a year ago, the online market accounted for 11 per cent of the ASX trades; it's now over 13 per cent and I think that will continue to climb over time.

OBR: Online trading offerings had been fairly stagnant for a few years, but more recently we've seen Macquarie Edge and a new platform from Westpac. What sort of platform changes are customers demanding, and how is E*TRADE responding?

SS: The things we hear are pretty consistent. They obviously want the basics of up time and availability, that's just price of entry now, but what they're specifically asking for now are things like make trading easier and that means different things to different people. For some people, that's more education, more hand holding and taking them through the process. For your active trader doing 10 to 30 trades a day, 'easier' is more about being able to do things quickly and having links in intuitive places.

And also there's ongoing demand for getting access to products that were previously only available to institutions or high net worth individuals.

We introduced free tax reporting last year for all customers of E*TRADE. That's a service that if you bought it you would be paying a provider a minimum $500 up to $10,000 if you are actively trading. That's done for free now. A year ago it was unthinkable and now it's free.

OBR: How important is the mobile phone channel for E*TRADE customers? What sort of uptake have you had and what are customers telling you about it?

SS: It's highly important to a small number of customers today, but that number is growing quickly. They tend to be reasonably wealthy, so it's a market we can't ignore. I think in 18 months' time, it will be absolutely price of entry for online banking and for online trading. It's not a matter of if but when, so watch this space.

OBR: For years there has been a gradual trend driving the consolidation of financial data in one place for consumers. How do you think online trading platform providers should respond to this?

SS: I think the tax data is a great example. We've got the data sitting there and we can make that data work a lot harder and make customers' lives a lot easier. The seamless integration with ANZ online banking is another one. We already know those customers, so we can just make their life easier. Where there's already demand for it, it's a great idea. Many people have tried doing different types of aggregation of that data and very few have actually succeeded. They typically fail because they try and create something where there is not existing demand.

We believe there is existing demand for convenience and convenient relevant solutions, so if we can make it more relevant and convenient we'll absolutely invest in doing it.

There are some costly learnings in trying to think too far ahead about what the customer might want and investing in that and then realising it's not what people want, it's not relevant enough.

OBR: Would you consider opening up your platform? We're seeing more web services and businesses like PayPal opening up their API to allow people to contribute. Would you open up your platform for co-creation?

SS: It's a very attractive notion. It's something we would do very cautiously. Apple has got it right in terms of generating content for its app store, but most of that involves no risk and no downside to the customer. It is a different game when you're talking about letting people create financial vehicles or anything that involves money. That requires a lot more caution.

OBR: You hold a lot of data about what customers are doing, how they're behaving. Is that the sort of data you would ever consider consolidating on a group basis and making available to people in a more visible way?

SS: One of the things we invested in last year was moving all of that data into bank data centres, so it's vastly more secure.

What we've started doing more of in the past six months or so is providing things like the top 10 stocks that were the top 10 buys or sells from all E*TRADE customers and the top 10 longest short positions in terms of CFD? We've had it for a couple of years but we're updating it much more regularly now and that is very, very popular with people. We're not giving them advice, but it gives them the facts. I liken it to asking someone who's going to win the election versus going to the TAB and seeing where people are putting their money, who are they betting on. It's much more relevant and we want to do a lot more of that. So instead of giving opinion, we're playing people back the facts, which they love.

OBR: What do you predict will be the next disruptive innovation in financial services?

SS: If I knew and I could tell you it would no longer be disruptive! But a couple of thoughts: online trading is still very immature and that's also true for online banking. There's still a tonne of things you could do to make the experience better and we're only at the beginning of that. So there's a lot still to come. I do think expectations are ramping, so free tax reporting is a huge thing, but people will just keep expecting the next thing.

It will be a combination of continuing to have chunky pieces of functionality like the seamless login and free tax reporting, or new investor websites combined with better use of information, and then wrapping that up in a website that is genuinely easy to use and interact with.