Table of Contents
- EXECUTIVE SUMMARY
- Introduction
- Market context
- Fees and charges
- Online stockbroking
- Spread betting and CFDs
- INTRODUCTION
- What is this report about?
- Who is the target reader?
- How to use this report
- CHAPTER 1 MARKET CONTEXT
- Introduction
- Key findings
- The retail direct equity market continues to recover but faces
competition
- Investors are saving and investing again but their focus has shifted
from equities to other asset classes
- The retail direct equity market has recovered to its 2001 level, but is
still almost 30% below its 2000 level
- The total retail balance of rest of world shares and other equity has
trebled since 2002
- Retail balances have recovered due to capital appreciation
- Individuals' share of total beneficial ownership of UK equities has
slightly declined between 2003 and 2004
- Individual share ownership levels have continued to fall regardless of
investors' age, income and sex
- 55-64 year olds are the most likely individuals to maintain equity
holdings
- Males are more likely than females to hold shares
- Individual share ownership has fallen almost across all income bands
- Individual investments in direct equity have declined in recent years
while investments in ISAs have increased
- Individual direct equity holding plays a continuing role in retirement
planning
- The retail equity market will continue to recover to 2010
- CHAPTER 2 FEES AND CHARGES
- Introduction
- Key findings
- Methodology and assumptions
- Flat fees have become more common in the UK in recent years
- Bargain and method comparison
- Small size considerations
- Sharedeal Active and First Direct are the least expensive telephone
traders for small bargains
- Hoodless Brennan and The Share Centre are the least expensive Internet
stockbrokers for small bargains
- Medium size considerations
- Medium size considerations traded by phone cost up to GBP242.50
- Medium size considerations traded via Internet cost between GBP15.60 and
GBP18.85 on average
- Large size considerations
- Trading large size considerations by telephone costs up to GBP417.50
- Large size trades via Internet cost GBP19.30 to GBP21.95 on average
- Annual and other charges
- Most stockbrokers charge clients for transferring stock out of their
account
- Several stockbrokers impose additional fees and charges for their
services
- Many stockbrokers offer discounted rates for frequent traders
- Fees and commissions: Hypothetical portfolio
- Hoodless Brennan and Fast Direct Share Dealing are the least expensive
online stockbrokers in the UK
- Jarvis Signature is the most expensive online stocktrading service in
the UK
- First Direct Share Dealing is the least expensive telephone stockbroking
service in the UK
- James Brearley offers the most expensive telephone stockbroking service
- Overall, First Direct is the least expensive stockbroker in the UK
- CHAPTER 3 ONLINE STOCKBROKING
- Introduction
- Key findings
- Online stockbroking accounts for the majority of the execution-only
market
- The aftermath of the dot.com bubble has seen consolidation in the online
stockbroking market
- The advantages of online stockbroking: it is fast, easy and cheap
- Charges for online stockbroking in the UK are still relatively high,
compared to the US
- Private Investors are becoming more and more comfortable holding shares
electronically
- Direct Market Access is the latest innovation in the online stockbroking
market, but is best suited to professional traders
- Execution-only direct equity trading will not be significantly impaired
by MiFID
- CHAPTER 4 SPREAD BETTING AND CFDS
- Introduction
- Key findings
- Financial spread betting and Contracts for Difference (CFDs) are carving
a chunk out of the retail direct equity market
- Significant advantages over direct equities have made these markets very
attractive
- Spread betting attracts no captial gains, income tax and no stamp duty
- Spread betters have the opportunity to go 'short' or 'long' and to trade
on margin with low capital requirements
- CFDs give investors exposure to a stock without having to pay the full
value and stamp duty
- There are already around 30 providers that offer spread betting and/or
CFDs
- CFDs and spread betting attract increased attention from the FSA and
will be strongly affected by new European regulation (MiFID)
- The FSA has already fined spread betting firms for offering inadequate
promotions to potential clients
- Under MiFID, providers of 'complex' financial instruments have to assess
their clients' ability and appropriateness to trade these products
- The emergence of spread betting and CFDs takes market share away from
direct equity trading
- Traditional brokers have to extend their product range if they want to
stay competitive
- Equity stockbrokers will not be made redundant as investors use
different products for different investment strategies
- Spread betting and CFDs are no threat to exchanges as most positions are
hedged in the marketplace
- APPENDIX
- Supplementary data
- Definitions
- Research methodology
- Further reading
- Datamonitor Savings & Investments SPP Reports
- Interactive Databases
- Reports
- Briefs
- Life and Pensions SPP
- Interactive Databases
- Reports and Briefs
- Financial Advice Market SPP
- SPP writing team
- List of Tables
- Table 1: Breakdown of UK retail equity balances by category, 2001-2005
- Table 2: Annual fees charged by stockbrokers, May 2006
- Table 3: Fees for transfers in and out, May 2006
- Table 4: Other fees and charges, May 2006
- Table 5: Hypothetical portfolio: Ranking of Stockbrokers based on
charges and fees for online transactions
- Table 6: Hypothetical portfolio: Ranking of Stockbrokers based on
charges and fees for telephone transactions
- Table 7: Banks involved in online share dealing in the UK
- Table 8: Example: spread betting on Company XYZ, long and short bets
- Table 9: List of providers that offer CFD trading and/or Spread Betting
- Table 10: Total value of UK retail savings and investments market by
broad product line, 2001-2005
- Table 11: Total retail equity balances by share type, retail equity
balance change due to capital appreciation and retail net inflows 2001-2005
- Table 12: Beneficial ownership of UK shares by ownership category, as
a proportion of total shares, 2000-2004
- Table 13: Proportion of households in each region with stocks and
shares / member of a share club, 2003-2005
- Table 14: Proportion of UK adults in each age band with shares
- Table 15: Proportion of male and female adults holding shares 2003-2005
- Table 16: Proportion of households holding shares by weekly income
bands 2003-2005
- Table 17: Have you added to your investment in any of these in the
last 12 months?
- Table 18: Please can you tell me, of these products that you have are
you contributing, or have you been contributing, to any of them actually
as part of your retirement planning?
- Table 19: In the next six months, which, if any, of these do you
intend to do?
- Table 20: Share of total execution-only transactions by trading method
- Table 21: Comparison of charges for telephone and Internet trades, GBP
- Table 22: Execution-only trades by channel
- Table 23: Retail equity market forecast until 2010
- List of Figures
- Figure 1: The share of retail assets held in direct equity has
remained constant at around 25% since 2002.
- Figure 2: Investors have regained confidence in quoted UK stocks in
the last four years, 2001-2005
- Figure 3: Capital appreciation increased strongly in 2005 while retail
net inflows declined, 2001-2005
- Figure 4: The FTSE 100 recovery since 2003 has resulted in increased
capital appreciation, 2001-2005
- Figure 5: Total individual beneficial ownership of shares has slightly
declined between 2003-2004
- Figure 6: The level of direct equity ownership among UK households
remains heavily slanted towards the South East
- Figure 7: The age range of 55-64 year old people in the UK has the
highest proportion of individuals holding equity
- Figure 8: 4% more UK males, on average, hold shares than women,
2004-2005
- Figure 9: Share ownership has fallen almost across all income bands
- Figure 10: Individual investments in direct equity have declined in
recent years while investments in ISA have increased
- Figure 11: Direct equity holding plays a continuing role in retirement
planning
- Figure 12: It is expected that the retail equity market will continue
to recover to 2010
- Figure 13: Stockbrokers offering flat fee structures as of May 2006
- Figure 14: The higher the bargain, the higher the costs for trading
- Figure 15: Sharedeal Active and First Direct are the least expensive
telephone stockbrokers for small bargains while James Brearley and Eden
Financial are among the most expensive
- Figure 16: Hoodless Brennan and The Share Centre are the least
expensive Internet stockbrokers for small bargains while Capita
Sharedealing is the most expensive
- Figure 17: Sharedeal Active and First Direct are the least expensive
telephone stockbrokers for medium size bargains while James Brearley is
the most expensive
- Figure 18: Hoodless Brennan and The Share Centre are the least
expensive Internet stockbrokers for medium size bargains while Jarvis is
the most expensive
- Figure 19: Large size trades via phone cost £90-£120 on average
- Figure 20: Large size trades via Internet cost £24-£29 on average
- Figure 21: Hypothetical portfolio: comparison of stockbrokers that
offer Internet and telephone trading
- Figure 22: In 2005 Internet share dealing has overtaken traditional
trading methods
- Figure 23: CREST Membership provides for full shareholder rights
- Figure 24: CFDs are an ideal trading vehicle for short-term investments
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