Andrew Green, Acting Financial Editor
Mayberry Investments chairman Christopher Berry (left), and chief executive officer Gary Peart
YOU PROBABLY already know a little bit about Mayberry Investments, that big stockbroking firm?
But did you know that the company made more money from its fixed income revenue stream than from equities last year?
Mayberry has for long been earning its bread and butter from fixed income sources, says the company's new chief executive officer, Gary Peart. Because it started two decades ago as a brokerage house for equities and is a major player in that market, it is still seen primarily as a broker.
Mayberry has changed and will continue to change, he said. The family-owned firm went public earlier this year and has been charting a new course.
"At that point before the initial public offer, you had a company with share capital of just under $1 billion and assets in excess of $10 billion. It had diversified revenue streams coming from equity trading, fixed income, foreign exchange and asset management."
Fixed income operations provided 51 per cent of gross revenues, equity trading was 31 per cent, fees amounted to 13 per cent and dividends provided six per cent.
EQUITY AND FIXED INCOME
"The mainstay of the company over the last 20 years has really been equity and fixed income," he said. "In recent times we have diversified into asset management and foreign exchange dealing. There has been a cambio for some time but we are not seen as one of the big players."
That cambio is now one of the areas which is being targeted for growth.
"Our customer base is quite significant. But we don't cross-sell sufficiently. Our fixed-income account customers generally don't cross over to our equity products and neither one generally uses the cambio service. We are looking to cross-sell and publicise to these accounts that we do have a cambio."
CAMBIO OPERATION
Because of the size of the company's fixed income international operations, it is expected that the cambio operation could be increased significantly, once customers use it to carry out their transactions.
"Cambio revenues have started to increase but it still represents less than one percent of our
revenues."
But asset management is the area which offers the most scope for a major expansion, he said. "We are looking to build revenues from the asset side of the business to 30 per cent of total revenues over the next three to five years."
Their aim is to get to a point where risk is reduced as much as possible.
"When you have your repo book, the movement in interest rates will impact your profitability. The broker's own account equities will also affect profitability when the market changes. The ideal is a business model where regardless of movements in the market, you will be able to sustain your income. Our aim is to build a consistent fee income."
Financial Services Commission regulations are pushing the company in that direction.
The allocation of capital is of paramount importance now, he stated. The FSC wants to ensure that companies have adequate capital to survive if the market moves against them. The meltdown of the 1990's was a consequence of inadequate capital.
The FSC has established regulations so that financial services companies can withstand a 20 or 30 per cent reduction in asset values.
"What that means for Mayberry is that the areas we used to grow at a tremendous rate are going to slow down. We need now to generate revenue from sources that will not require as much capital as the traditional sources.
"I have to devise revenues streams which require minimal capital. Management of mutual funds does not require additional capital because the risks are matched with the assets and we charge a management fee. A lot of our competitors will have to move in the same direction."
To drive this growth Mayberry has instituted an innovative expansion plan. The company has essentially quadrupled its sales force. The total staff count moved from over 50 members last year to 110 now.
Instituted by chairman Chris Berry, this programme is unusual in that it aims to cover the entire island without setting up separate offices.
The aim is to build an aggressive and efficient sales team that can reach out to potential customers who are not now being effectively served.
The programme is showing improvement and "we believe it will work," he said. "We know it makes more sense to hire financial advisors than to build offices if our goal is to expand revenues."
