Sharedealing and Online Investing - UK - September 2008

Abstract

Individual shareholding has steadily declined since the end of the dotcom crash. More recently, amid the turmoil of the credit crunch and the economic slowdown that has resulted, volatility in global stock markets has deterred many consumers from equity-based investment. In addition, some investors are seeking out lower-risk areas, such as gilts, bonds and commodities. At the same time, though, with the growing popularity of derivatives, ETFs and collective investments, many stockbrokers are expanding their product range to include indirect equity-based investment devices.

With broader company exposure and the benefits of a professional fund manager, collective investments have grown increasingly popular in recent years, as have ETFs more recently. Derivatives trading has also grown massively, in particular spread betting as it enables investors to hedge their positions and make gains in declining markets as well as rising ones. Whilst this may have affected demand for individual share ownership to some extent, many argue that this is a complementary product, not a competing one, and it could even tempt new investors into the market.

This report looks at some of the key factors that influence demand within the sharedealing market, from stock market volatility to population demographics. It considers competitive products, such as buy-to-let (BTL), cash ISAs and collective investments. Strengths and weaknesses in the market are outlined prior to an assessment of market size, forecast growth and distribution channels. Some of the key players are considered in the context of recent market developments and individual market shares. Finally, the report rounds off with a discussion of the consumer research that was conducted for this report and what it might suggest for those within the sharedealing market.

Key issues

• The credit crunch, economic slowdown and volatility in global stock markets.
• Weakening investor sentiment and stretched consumer finances.
• Movement into lower-risk investment categories.
• Rising demand for collectives investments, ETFs and derivatives.
• Traditionally weak consumer appetite for risk-based investment.