Two of Hong Kong’s biggest stockbrokers are opening bricks-and-mortar branches as they embrace in-person customer service in the digital era.
Futu Securities International (Hong Kong) has done a U-turn on its apps-only, branchless strategy by opening an outlet in the bustling Causeway Bay district last week, adding to its network in Mong Kok, Tsuen Wan, Tsim Sha Tsui and its expanded headquarters in Admiralty.
Phillip Securities is scouting for additional locations while upgrading its three existing branches in Admiralty, Kwun Tong and Sheung Shui. The firm, founded in Singapore in 1975, had shrunk its network from seven locations during the recent market slump.
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“Branches do have the advantage of attracting new customers,” said Louis Wong, executive director of Phillip Capital Management (Hong Kong), part of the brokerage group. “We will choose new locations that can attract more account openings and invest more in customer services and technology to better serve them.”
The trend reflects the need by some brokers to distinguish themselves from the anonymity of online competition, where zero-commissions trading and bot-assisted advisers are winning the battle for retail investors. In Hong Kong, number of brokers has declined to 545 from 606 in 2019 and more than 1,000 in the 1990s, while the city’s market value grew to US$5.6 trillion and daily turnover hit an all-time high of US$79 billion.
The shift to online stock trading has pushed small stock brokerages out of business over the years, but some are making an effort to stay relevant as they invest in physical stores to attract new investors and increase brand visibility.
Futu Securities last week opened its fourth branch in Causeway Bay. Its outlets in Mong Kok and Tsuen Wan opened for business in the third quarter, while the Tsim Sha Tsui branch started taking customers last year. The broker moved into a new 20,000-sq ft headquarters in Admiralty in April, expanding its floor space by 80 per cent.
“We have had good response from customers who visit our physical stores to learn more about our apps and services,” managing director Daniel Tse said. “This has helped us expand our customer base to the less tech-savvy customers, as well as establish our brand in the community.”
Futu said it has attracted around 30,000 visitors to its branches. And since the market rally started in late September, the crowds have only grown. The number of visitors at these stores has risen up by more than 60 per cent from normal levels in recent weeks, Tse said.
The benchmark Hang Seng Index jumped 18 per cent last month after the Federal Reserve lowered its key interest rate by half a percentage point on September 18, the first cut in four years. Gains multiplied after Beijing unleashed bold stimulus measures on September 24 to reverse China’s housing and stock market slump.
Futu, which has been operating in Hong Kong for 12 years, initially only had its headquarters in Admiralty, while customers use its mobile app to open accounts and trade. Its customers are overwhelmingly tech-savvy, aged between 20 and 40, who use their mobile phones for practically everything related to finances.
After the Covid-19 pandemic, Tse said Futu wanted to increase face-to-face engagement with customers and capture clients from a less tech-savvy demographic group.
“We want to have a similar concept to Apple stores, which allows customers to try the devices and experience the products,” Tse said. “As many customers are not familiar with Futu Securities or online trading, the staff introduces them to our services and lets them try our apps.”
This has allowed Futu to attract older customers in their 40s to 60s, with the broker arranging dozens of educational seminars at its stores. Physical stores are “extremely good for brand building” and Futu will continue to open at more locations in the future, he added.
Before the digital era, branches were an important channel for brokerage firms to expand their customer base as clients had to be physically present to open accounts, according to Tom Chan Pak-lam, honorary president of the Institute of Securities Dealers.
“Many investors would get together at these brokerages to discuss investing and use the terminals to trade,” Chan said.
However, the advent and growing popularity of online trading shook the industry, forcing traditional brokerages to trim their branch network to reduce costs. The trend is reversing amid a red-hot market and buying frenzy. Some brokers are toying with the idea of opening more branches for marketing exposure.
“With the stock market rally recently, it is likely the trend [of opening new branches] will continue,” Chan said.
Phillip Securities had cut down its number of branches to three from seven, but the broker is now scouting for new locations and upgrading its branches. Everbright Securities International has a branch in Hong Kong and Macau, compared with a total of three five years ago.
Despite the rise in popularity of online trading, Everbright Securities said physical branches still play a vital role for different investors who value “face-to-face interaction and personalised services,” a spokeswoman said.
“Hence, we have adopted a mixed strategy of having both physical and online platforms to meet diversified client needs, ensuring an optimal experience that aligns with their investment needs and expectations,” she added.
More from South China Morning Post:
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