The 2015 Online 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.
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).
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.
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.
Pawel's discussion encouraged brokers to focus on the following areas to improve the client experience.
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.
