Market share plummets on fee structure change + 3 more lessons from global survey

The 2015 RETAIL BROKER SUMMIT in Toronto opened with a keynote presentation by Investment Trends' Pawel Rokicki offering an insightful preview of their annual global online broker survey. Don't miss these highlights, and be sure to contact Investment Trends for full reports to learn from other broker successes and misses. 

At 2.8% penetration, U.S. market still has room to grow

 6.8 million Americans trade equities online. And while U.S. online broker market is the world’s largest among the seven key economies examined by Investment Trends, the per-capita numbers are less impressive: just 2.8% of American adults are trading online (versus Hong Kong, where 10% of adults are trading).

Lesson #1: Education Needed to Expand Market. 33% of people attribute lack of knowledge as barrier

Lack of financial knowledge and understanding remains a barrier to online trading. There is tremendous opportunity for brokers to educate investors and give them the confidence they need to begin trading. 31% "just haven't gotten around to it yet"; this warrants more exploration of how we might nudge them forward.

When asked what type of education is needed, the top category was Analysis including Fundamental Analysis, Market & Trend Analysis, and Technical Analysis.

Lesson #2: Investor Perceptions are Changing. Value for money is now about innovation not only low cost

In 2012, value for money was almost exclusively associated with low cost. Three years later, value for money is now strongly tied to innovation, which correlates strongly with customer satisfaction. Investors today are much more focused on what they’re getting for the price they’re paying.

Lesson #3: Focus on Strength of Platform. TradeStationand Fidelity led the pack with more than 60% of primary clients noticing useful innovations in 2015

Pawel's discussion encouraged brokers to focus on the following areas to improve the client experience.

  1. Strength of platform (ease of use)
  2. Innovation
  3. Quality of customer service and decision support
  4. Strong marketing and brand perception
Lesson #4: Effectively Manage Regulatory (And Other) Changes. Know why investors are buying from you first

Background: Similar in many ways to Canada’s impending CRM2, U.K. regulatory reform, introduced in 2012, shifted broker revenue streams away from commissions (implicit fees) to an explicit fees-based (transparent) model. How brokers responded to the changes significantly impacted their bottom lines.

Implication: Many brokers who previously competed exclusively on cost replaced their trail commissions with quarterly account fees.

The Impact: Clients left firms because there was a perceived lack of value for money. [ Read more about why some investors may prefer to pay the trailer fees. ]

Lesson Learned: Before reacting to pricing reforms, it’s critical that brokers have a full understanding of why clients use their services. By revising their fee structures, low-cost brokers effectively surrendered their primary competitive advantage – and valuable market share.

Conversely, those brokers that provided superior customer service and innovative platforms were able to thrive as the pricing landscape changed.

Full Reports are Available from Investment Trends

Please contact Urvi Burman for access to any of these reports.

Thanks to participating online brokers and partners...

...for being so open and engaged in discussing the industry and our collective role in moving it forward to improve experiences and outcomes for investors at large. Here is the summit's opening video with an update about the Recognia TRADING CENTRAL business, and the themes discussed during the event. 

Connect with us if you'd like a copy of these slides, or if you want to be involved in the next summit!

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