By Saul Dawes
To learn more, watch this short ‘How it works’ video.
As we come out of the ‘cheap money’ reality of the last decade, many wealth managers are asking the same question: what can we do to drive year-on-year revenue growth and keep clients, as well as underlying investors, happy?
While the rising interest rate environment has seen cash balances re-enter the fray as a key revenue pillar, as we saw with huge spikes in volumes and trading revenues in early ‘20, this isn’t viable in the long run to deliver year-on-year growth. What happens when rates normalize?
Add to this that in the current macroeconomic environment of heightened uncertainty and a growing cost of living crisis, brokers need to innovate to attract and retain clients who in a fiercely competitive market are demanding more and more.
While the obvious answer might be cryptos, the more sustainable and lower risk answer is securities lending as a service (SLaaS). Here are three reasons why we think SLaaS should be your answer:
- Readily available revenue. Securities lending revenue is generated from assets your clients already own, meaning it is revenue currently available and being ignored. Additionally, lending rates for borrowing assets tend to have a negative correlation to market conditions, so when assets underperform, lending rates often rise – acting as a buffer and reducing portfolio volatility
- Alignment of interests with clients. If you’re making money, your clients are too. With all loans over-collateralized and with the collateral ring-fenced, loans are risk-mitigated too.
- Minimal barriers to implementation. Securities lending has seen a recent and growing wave of adoption, but previously there were many barriers to entry. Through a combination of technology and expertise, SLaaS offers access to the sector with minimal disruption to existing infrastructure and platforms, and no licensing fees.
