There has been a spike in trading activity by self-directed investors over the last 15 months and we’ve seen the arrival of a new cohort of first-time investors who are attracted to some of the higher risk options. US tech stocks, cryptocurrency and CFDs have all been popular, prompting us to consider whether we need to pay closer attention to a wider range of brokers in the D2C space.
In our UK D2C: Market Update published today, we have mapped the market for funds, listed securities, digital wealth managers, cryptoassets and leveraged trading. Of course, there is considerable cross-over.
Direct platforms have benefitted from heightened levels of share trading as well as asset growth from recovering markets. However, they are increasingly coming up against niche brands that have capitalised on the opportunity to grow share trading alongside their core activities. These services bring new features including zero-commission, fractional trading, wider access to international shares and advanced technology platforms.
This is a threat to direct platforms. Funds are not necessarily the starting point for investing. Only 17% of new investors use funds – this is far behind shares and cryptocurrency. While some new investors will invariably get burnt, it is helpful to understand their thinking as they embark on their investing journeys.
Coinbase, Trading 212, Revolut, Binance and Moneybox are all in the top 10 online investing services used by new investors. Hargreaves Lansdown and Vanguard Investor are also in there, but plenty of well-known direct platforms are not. Similarly, brand awareness for the likes of Nutmeg, eToro and Freetrade are above leading services like Fidelity Personal Investing, AJ Bell Youinvest and Interactive Investor.
This suggests that the marketing of newer brands is having some success, and their service offering is appealing. Try putting a few investing key words into Google and you will be bombarded by these brands on YouTube!
While average portfolio sizes for new investors are relatively small, they will grow over time, especially if pension assets follow. Established services run the risk of missing out on this new cohort. But they also have an opportunity to examine the neo-brokers’ appeal. In the same way that the housing market is driven by first time buyers, established online investing services need to pay attention to the new cohort of investors.
More information on our UK D2C research is available on our website.