Investment Trends 2014 Australia Second Half Online Broking Report

Key findings of the Investment Trends 2014 Second Half Australia Online Broking Report:

• – Low return expectations hamper online trading market growth over second half of 2014
• – Small players are nibbling away at the leaders but CommSec remains very dominant
• – Traders want brokers to help them identify investment opportunities. Those brokers who delivered this well reaped the benefits on client satisfaction

The Investment Trends 2014 Second Half Online Broking Report is an annual in-depth study of Australian online share investors’ attitudes and investing habits, based on a survey of 11,879 traders and investors concluded in November 2014. Some key highlights include:

Low return expectations hamper online trading market growth over second half of 2014

The number of active online share traders increased from 585,000 to 595,000 between June and November 2014. This represents an annual growth of 2% (over the period from December 2013 to November 2014), which was relatively modest compared to the growth recorded in most other countries surveyed by Investment Trends. The US, UK, French and German online broking markets all expanded by between 9% and 16%, while Singapore saw a decline.

Australian investors’ expectations of capital gain expectations from the sharemarket remained stubbornly subdued in the second half of 2014. As a result, 111,000 investors fell dormant in the six months to November 2014. This was, however, offset by a 36,000 new entrants and a record 85,000 dormant investors (those who used to trade but had not for over 12 months) who returned to online share trading.

“We’ve seen investors outlook on the domestic economy begin to slowly deteriorate since mid-2013,” said Irene Guiamatsia, analyst at Investment Trends. “The Australian market started strongly in 2014 but fell in the second half to finish the year even.  This upheaval over the second half of the year saw fear levels rebound and dented return expectations.”

Small players nibbling away at the leaders but CommSec remains very dominant

In the six months to November 2014, nabtrade, CMC Markets Stockbroking and Bell Direct registered primary market share gains, attracting a relatively large share of new investors.

“nabtrade has been attracting a large share of new traders through heavy promotion of their new platform,” said Guiamatsia “while CMC Markets is beginning to successfully expand its value proposition beyond its low price point.”

CommSec slipped slightly to 42% primary market share (down from 44% in June 2014), but maintained its overall share of relationships with online traders and continues to dominate the online broking market. The top three brokers, CommSec, E*TRADE and Westpac Online Investing, hold a 66% primary share of the market, making Australia a uniquely concentrated market among the seven countries surveyed by Investment Trends.

The six largest online brokers by primary relationships were:

Traders want brokers to help them identify investment opportunities. Those who delivered this well reaped the benefits on client satisfaction  

“Low market return expectations means investors are finding it more challenging to spot good trading opportunities,” said Guiamatsia. “Towards the end of year, heightened volatility tested investor confidence and placed brokers under increased pressure to demonstrate value for money and to help investors identify opportunities.”

nabtrade, CMC Markets and Bell Direct received the highest ratings for trading ideas, stock picks and value for money.

At an industry level, overall client satisfaction with the main broker declined slightly from the levels seen a year ago. Bell Direct, CMC Markets Stockbroking and CommSec were the top three brokers based on overall client satisfaction ratings, and nabtrade gained one notch to place fourth.