Research into Australia’s online broking industry has shown record numbers of Australians are investing offshore, challenger brands are taking market share from traditional brokers, and direct investors have three big concerns.
Investment Trends conducted a quantitative online survey of over 8,500 respondents. The size of the retail online investing market in Australia measured by the number of investors who placed at least one online trade in the last 12 months fell slightly against equities trading volumes which increased hitting a peak of 36 million in May 2019 (vs 31 million in May 2018).
The report revealed several insights about sentiment in this large group of investors, including what stimulates their investing activity and how they rate Brokers in terms of a range of features.
The three biggest concerns and two being discounted
Participants in the survey were asked what they are most concerned about in relation to their investments.
The three biggest were, in descending order, Tensions between the world’s major economies, followed by the White House administration then the Australian economy. Interestingly, concerns around the Australian economy have spiked higher over the past year and now ranked above fears of a China slowdown.
Housing no longer ranked among the list of concerns for investors, with >10 per cent of survey respondents citing property prices as a concern (versus >30 per cent just one year ago). And inflation, whilst problematic for central bankers (as at the time the study was conducted) it is last on the ‘worry list’ for direct investors
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Source: Investment Trends
What motivates direct investors?
The research highlighted two interesting insights into what is motivating direct investors to act.
1) Knowledge
Knowledge was identified as the key driver of investment activity and in some cases was a bigger impediment to trading activity than market uncertainty.
Online investors draw on a wide range of sources for their research including broker reports, forums, online search and YouTube videos. Research provided by their main broker is reported to be the most trusted, however, there was a desire to see improvements in the following areas:
- Depth of research
- Reporting on track records of experts/analysts
- Inclusion of evidence supporting recommendations
- Provision of counter-arguments to recommendations
Source: Investment Trends
The number of Australians trading international shares has doubled over the past three years. The study found that online investors, who don’t trade international shares, can be encouraged to use them by addressing their knowledge gaps (40% cite this as an obstacle).
Education has a tangible impact on the trading activity of online investors, especially the younger cohorts, with half saying it motivated them to place more trades in the past year.
2) Smashed Avo!
A key driver for millennials to invest is their desire to build up enough wealth for them to purchase a property. Millennial investors are also more likely to believe that markets will appreciate in the long run when compared to older investors.
17% of millennials listed the desire to buy property as a strong driver of their investment activity versus 3% of non-millennials.
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Source: Investment Trends
Online investors who participated in the survey generally agreed with the view that investing in shares would help them reach their financial goals sooner. They didn’t agree that property was a safer bet than shares and were strongly against borrowing to invest.
Price, Technology and Trust
The Investment Trends report asks the participants to rate their brokers across twenty-one service areas. When it comes to the crunch investors said that price, technology and reputation were the three most influential factors in choosing an online broker.
New entrants to the market are competing aggressively on price and are slowly gaining share by reaching younger users via social media and online advertising.
Industry wide, the top broker selection drivers are competitive fees (52%), website ease of use (52%) and reputation (45%)
Consistent performance by Bell Direct
Over the last seven years, Bell Direct has performed consistently, ranking #1 for overall customer satisfaction, as voted by investors in 13 out of 14 surveys conducted by Investment Trends. Challenger brands such as SelfWealth and Stake gained ground with low-cost trading solutions.
Bell Direct is currently offering Livewire subscribers 5 free trades. Find out more on the offer here.