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Online Investing - US - July 2009

Recent economic developments have made investing top of mind for many people—and this has been especially true for those who trade securities online. Both individual and advisor assisted transactions have seen an increase in recent months, as investors take a step back to reassess their own financial situations. As these changes take place, there are a number of questions that those in the industry will find important in gaining a better understanding of their customers. Those questions are discussed in this report, and include:

  • What are the reasons that investors are trading with and without an advisor?
  • How do these investors feel about the economy, and what do they expect to happen in the near future?
  • Are investors trading more or less frequently now and why?


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Table of contents

  1. Scope and Themes

    • What you need to know
      • Consumer survey data
        • Greenfield Online
          • Experian Simmons National Consumer Studies
            • Advertising creative
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                    • Companies mentioned in this report:
                    • Executive Summary

                      • Industry overview
                        • Increasing volumes
                          • Sophisticated online investment tools and resources
                            • The competitive landscape
                              • Male and female investors
                                • Online investment behavior
                                  • Attitudes toward investing online
                                    • Types of accounts
                                    • Insights and Opportunities

                                      • Key points
                                        • Customer service—it only takes one bad experience
                                          • We won’t get fooled again!
                                            • Do it for me, exactly the way I want it
                                              • Mr. Wizard
                                                • Good afternoon, Mr. Bond
                                                • Inspire Insights

                                                    • Art today, gone tomorrow?
                                                      • Hide and Seek—online games and the importance of play
                                                        • Investors commune as they challenge investment strategies
                                                        • Market Size and Forecast

                                                          • Key points
                                                            • Online investment account growth
                                                              • Figure 1: Proportion of respondents who own an online trading account, 2002-08
                                                            • Market volatility spurs online activity
                                                              • Figure 2: Frequency of online brokerage account activity, 2002/03-2008/09
                                                            • Building confidence in a time of uncertainty
                                                            • Competitive Context

                                                              • Key points
                                                                • And the winners are…!
                                                                    • Figure 3: Ranking of the overall online investing experience, by online brokerage, May 2009
                                                                  • Cost is king
                                                                    • Figure 4: Importance of features in online trading account(s) to active online investors, by gender, April 2009
                                                                    • Figure 5: Importance of features in online trading account(s) to active online investors, top box (5—very important), by gender, April 2009
                                                                    • Figure 6: Importance of features in online trading account(s) to active online investors, top two boxes (very important and somewhat important), by gender, April 2009
                                                                    • Figure 7: Importance of features in online trading account(s) to active online investors, summary of means, by gender, April 2009
                                                                    • Figure 8: Assorted investor trading costs, by online brokerage, May 2009
                                                                    • Figure 9: Top online investing brokerages for online trading site usability, May 2009
                                                                    • Figure 10: Top online brokerages for available assorted research resources and amenities*, May 2009
                                                                    • Figure 11: Top online investing brokerages for customer service and access, May 2009
                                                                    • Figure 12: Online investment brokerage offerings of bonds, certificates of deposit (CDs), and mutual funds, March 2009
                                                                    • Figure 13: Online investment brokerage offerings of options, futures, and international investments, March 2009
                                                                    • Figure 14: Mobile phone access of online brokers, March 2009
                                                                  • J.D. Power and Associates’ 2008 Self-Directed Investor Satisfaction study
                                                                      • Figure 15: J.D. Power and Associates’ 2008 Self-Directed Investor Satisfaction index ranking of investment brokers, October 2008
                                                                  • Segment Performance

                                                                    • Key points
                                                                      • Female breadwinners of the future
                                                                        • Workers take advantage of 401ks and company match
                                                                          • Figure 16: Investment ownership and investment type, by gender, 2002/03-2007/08*
                                                                        • Consumer market share for online account providers
                                                                          • Figure 17: Mutual fund/brokerage account provider for online or wireless account owners, October 2007-December 2008
                                                                        • A flight to “safety”
                                                                          • Figure 18: U.S. stockmarket performance, 2000-09*
                                                                        • Barron’s rankings
                                                                          • Figure 19: Barron’s—best online brokerages for long-term investing, March 2008
                                                                          • Figure 20: Barron’s—best online brokerages for frequent trading, March 2008
                                                                          • Figure 21: Barron’s—best online brokerages for options trading, March 2008
                                                                          • Figure 22: Barron’s—best online brokerages for international trading, March 2008
                                                                      • Marketing Channels

                                                                        • Key points
                                                                          • Full-service brokers still dominate the investment channels
                                                                            • Figure 23: Distribution of brokerage mutual fund/brokerage accounts, by firm, channel, and gender, October 2007-December 2008
                                                                            • Figure 24: Active online stock owners who used a broker in last 12 months, by gender, April 2009
                                                                            • Figure 25: Reasons why active online stock owners used a broker, April 2009
                                                                          • Male and female preferences
                                                                              • Figure 26: Online mutual fund/brokerage accounts, by firm and gender, October 2007-December 2008
                                                                              • Figure 27: Online mutual fund/brokerage accounts, by firm and gender, October 2007-December 2008
                                                                          • Market Drivers

                                                                            • Key points
                                                                              • Difficult market conditions persisted in Q2 2009
                                                                                • Volatility spurs significant increases in frequency of online trading activity
                                                                                  • Figure 28: Frequency of online brokerage account activity, 2002/03-2008/09
                                                                                • Increases in population share among 55-74 year olds
                                                                                  • Figure 29: Population aged 18+, 2004-14
                                                                                  • Figure 30: Presence of online investors, investing and type of investment, by age, December 2008
                                                                                • Online fraud soars in 2008
                                                                                  • The Financial Industry Regulatory Authority (FINRA) is scrutinizing the municipal bond market
                                                                                  • Leading Companies

                                                                                    • Key points
                                                                                      • TD AMERITRADE
                                                                                        • Siebert Financial Corporation
                                                                                          • Fidelity Investments (FMR LLC)
                                                                                            • ShareBuilder
                                                                                              • Vanguard
                                                                                                • E*Trade
                                                                                                  • Scottrade
                                                                                                    • Charles Schwab
                                                                                                      • Banc of America Investment Services, Inc.—a non-bank subsidiary of Bank of America, NA
                                                                                                        • Zecco Trading Inc
                                                                                                          • GAIN Capital
                                                                                                            • TradeKing
                                                                                                              • OptionsHouse, LLC
                                                                                                                • SogoTrade
                                                                                                                • Innovation and Innovators

                                                                                                                  • Key points
                                                                                                                    • Advances in technology
                                                                                                                      • Trading on the run
                                                                                                                          • Figure 31: Mobile phone access of online brokers, Barron’s, March 2009
                                                                                                                        • Community
                                                                                                                          • Education
                                                                                                                            • Scottrade expands national user summit program in 2009
                                                                                                                              • Scottrade Portfolio Director™ software for Advisor Services
                                                                                                                                • Scottrade announces Scottrade Mobile
                                                                                                                                  • TradeKing offers advances in a variety of feature categories
                                                                                                                                    • Tools and Trading:
                                                                                                                                      • Zecco launches forex foreign exchange trading service
                                                                                                                                        • E*Trade launches Online Advisor
                                                                                                                                          • E*Trade New Fixed Income Tools, Research and Education
                                                                                                                                            • E*TRADE launches Mobile Pro Application for Apple iPhone™and iPod®Touch
                                                                                                                                              • New features and tools at OptionsHouse
                                                                                                                                                • Updates at siebertnet.com
                                                                                                                                                  • Scottrade gives investors options
                                                                                                                                                    • Other innovations
                                                                                                                                                    • Advertising and Promotion

                                                                                                                                                      • Key points
                                                                                                                                                        • Online brokers in print
                                                                                                                                                          • TD AMERITRADE promotes 401ks with incentives
                                                                                                                                                            • Figure 32: Online brokerages print ads, primary message, January-May 2009
                                                                                                                                                          • Issuers are pushing products focused on stability and protection of assets
                                                                                                                                                            • User-segment targeting, featuring automated tools of active traders
                                                                                                                                                              • More opportunities for investor education
                                                                                                                                                                • Asian Americans have most economic influence in multicultural market
                                                                                                                                                                  • TD AMERITRADE launched 'Second Opinion' campaign
                                                                                                                                                                    • Muriel Siebert advertising, marketing and promotion
                                                                                                                                                                      • Upromise
                                                                                                                                                                        • Figure 33: Upromise direct mail advertisement, May 2009
                                                                                                                                                                        • Figure 34: Upromise email advertisement, February 2009
                                                                                                                                                                      • The evolution of the CD in 2008
                                                                                                                                                                          • Figure 35: Orange CD from ING DIRECT, direct mail ad, December 2008
                                                                                                                                                                          • Figure 36: Circle Gold Certificate of Deposit from Citizens Bank, direct mail ad, December 2008
                                                                                                                                                                          • Figure 37: Circle premium money market performance account from SunTrust Bank, November 2008
                                                                                                                                                                          • Figure 38: Fixed-rate CD from Comerica Bank, November 2008
                                                                                                                                                                          • Figure 39: Market Volatility, Statement Mailing from Fidelity, November 2008
                                                                                                                                                                          • Figure 40: Innovative Creative: new blue money market from AmTrust Bank, November 2008
                                                                                                                                                                          • Figure 41: Statement mailing from E*Trade Financial, September 2008
                                                                                                                                                                        • Promoting opportunities for investor education
                                                                                                                                                                          • Figure 42: Retirement checkup from Fidelity Investments, September 2008
                                                                                                                                                                          • Figure 43: The 12 best (and worst) ideas for distributing your IRA or 401k seminar from AAA Minneapolis, September 2008
                                                                                                                                                                        • Television advertising
                                                                                                                                                                          • Figure 44: E*Trade television advertisement, February 2009
                                                                                                                                                                          • Figure 45: E*Trade television advertisement, "Shankapotamus,” February 2009
                                                                                                                                                                          • Figure 46: Buy on the stock exchange in Hong Kong, from New Jersey, January 2009
                                                                                                                                                                          • Figure 47: Gorillatrades.com television advertisement, Davy Jones asks for the secrets, March 2009
                                                                                                                                                                          • Figure 48: Online Trading Academy television advertisement, Man tells jokes, March 2009
                                                                                                                                                                          • Figure 49: Scottrade television advertisement, helicopter, September 2008
                                                                                                                                                                        • General industry advertising
                                                                                                                                                                          • TD AMERITRADE
                                                                                                                                                                            • Charles Schwab reviews $100 million media account
                                                                                                                                                                              • Charles Schwab intros ‘Make the Move’ campaign
                                                                                                                                                                              • The Consumer

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Who uses online investment accounts?
                                                                                                                                                                                    • Figure 50: Stock owners’ online brokerage account activity in last 12 months, by gender, April 2009
                                                                                                                                                                                    • Figure 51: Stockowners’ online brokerage account activity in last 12 months, by age, April 2009
                                                                                                                                                                                    • Figure 52: Stockowners’ online brokerage account activity in last 12 months, by income, April 2009
                                                                                                                                                                                  • Hispanic stock owners more frequently online traders
                                                                                                                                                                                      • Figure 53: Stock owners’ online brokerage account activity in last 12 months, by race/Hispanic origin, April 2009
                                                                                                                                                                                      • Figure 54: Stock owners’ online brokerage account activity in last 12 months, by number of people in household, April 2009
                                                                                                                                                                                    • Who’s using a broker and why
                                                                                                                                                                                        • Figure 55: Active online stock owners who used a broker in last 12 months, by gender, April 2009
                                                                                                                                                                                        • Figure 56: Active online stock owners who used a broker in last 12 months, by income, April 2009
                                                                                                                                                                                      • Household size matters
                                                                                                                                                                                        • Figure 57: Active online stock owners who used a broker in last 12 months, by presence of children and household size, April 2009
                                                                                                                                                                                      • Reasons for using a broker/adviser
                                                                                                                                                                                          • Figure 58: Reasons why active online stock owners used a broker, 2006 and 2009
                                                                                                                                                                                        • Hispanics are active traders and use advisers
                                                                                                                                                                                          • Figure 59: Active online stock owners who used a broker in last 12 months, by race/Hispanic origin, April 2009
                                                                                                                                                                                        • Differences by gender using advisers
                                                                                                                                                                                          • Figure 60: Reasons why active online stock owners used a broker in last 12 months, by gender, April 2009
                                                                                                                                                                                        • Trade frequency
                                                                                                                                                                                          • Figure 61: Frequency of trading by active online stock owners, 2006 and 2009
                                                                                                                                                                                          • Figure 62: Frequency of trading by active online stock owners in last 12 months, by gender, April 2009
                                                                                                                                                                                          • Figure 63: Frequency of trading by active online stock owners in last 12 months, by income, April 2009
                                                                                                                                                                                          • Figure 64: Frequency of trading by active online stock owners in last 12 months, by region, April 2009
                                                                                                                                                                                          • Figure 65: Frequency of trading by active online stock owners in last 12 months, by presence of children in the household, April 2009
                                                                                                                                                                                        • Account valuations
                                                                                                                                                                                            • Figure 66: Dollar value of online trading accounts, 2006 and 2009
                                                                                                                                                                                            • Figure 67: Dollar value of online trading accounts, by gender, April 2009
                                                                                                                                                                                            • Figure 68: Dollar value of online trading accounts, by income, April 2009
                                                                                                                                                                                          • Type of online account
                                                                                                                                                                                              • Figure 69: Types of online trading accounts, by gender, April 2009
                                                                                                                                                                                            • Reasons for less online investing—once burned, twice shy
                                                                                                                                                                                                • Figure 70: Reason(s) online traders don’t execute more online trades, by gender, April 2009
                                                                                                                                                                                                • Figure 71: Location of active online investor brokerage accounts, by gender, April 2009
                                                                                                                                                                                              • Cost is king
                                                                                                                                                                                                  • Figure 72: Importance of features in online trading account(s) to active online investors, by gender, April 2009
                                                                                                                                                                                                  • Figure 73: Importance of features in online trading account(s) to active online investors, by presence of children in the household, April 2009
                                                                                                                                                                                              • Cluster Analysis

                                                                                                                                                                                                  • Web Traders
                                                                                                                                                                                                    • Who they are
                                                                                                                                                                                                      • Opportunity
                                                                                                                                                                                                        • Constrictors
                                                                                                                                                                                                          • Who they are
                                                                                                                                                                                                            • Opportunity
                                                                                                                                                                                                              • Believers
                                                                                                                                                                                                                • Who they are
                                                                                                                                                                                                                  • Opportunity
                                                                                                                                                                                                                    • Cluster characteristics
                                                                                                                                                                                                                      • Figure 74: Online investing clusters, April 2009
                                                                                                                                                                                                                      • Figure 75: Respondents who have excuted online trades in last 12 months, by online investing clusters, April 2009
                                                                                                                                                                                                                      • Figure 76: Attitudes about whether the economic situation will improve, by online investing clusters, April 2009
                                                                                                                                                                                                                      • Figure 77: Attitudes about the economy and banks, by online investing clusters, April 2009
                                                                                                                                                                                                                    • Cluster demographics
                                                                                                                                                                                                                      • Figure 78: Online investing clusters, by gender, April 2009
                                                                                                                                                                                                                      • Figure 79: Online investing clusters, by age, April 2009
                                                                                                                                                                                                                      • Figure 80: Online investing clusters, by income, April 2009
                                                                                                                                                                                                                      • Figure 81: Online investing clusters, by race, April 2009
                                                                                                                                                                                                                      • Figure 82: Online investing clusters, by Hispanic origin, April 2009
                                                                                                                                                                                                                    • Cluster methodology
                                                                                                                                                                                                                    • Appendix: Attitudes About the Economy

                                                                                                                                                                                                                        • Figure 83: Attitudes about investing and the economy, by age, April 2009
                                                                                                                                                                                                                        • Figure 84: Importance of “better/free investment research” in online trading account(s) to active online investors, by income, April 2009
                                                                                                                                                                                                                        • Figure 85: Attitudes of active online investors, by age, April 2009
                                                                                                                                                                                                                        • Figure 86: Attitudes of active online investors, by income 2009
                                                                                                                                                                                                                        • Figure 87: Attitudes of active online investors, by race/Hispanic origin, 2009
                                                                                                                                                                                                                    • Appendix: Other Useful Consumer Tables

                                                                                                                                                                                                                        • Figure 88: Stock owners’ online brokerage account activity, by gender and presence of children, April 2009
                                                                                                                                                                                                                        • Figure 89: Stock owners’ online brokerage account activity, by gender and age, April 2009
                                                                                                                                                                                                                        • Figure 90: Stock owners’ online brokerage account activity, by age and ethnicity, April 2009
                                                                                                                                                                                                                        • Figure 91: Stock owners’ online brokerage account activity, by gender and income, April 2009
                                                                                                                                                                                                                        • Figure 92: Stock owners’ online brokerage account activity, by income and ethnicity, April 2009
                                                                                                                                                                                                                    • Appendix: Trade Associations

                                                                                                                                                                                                                      Companies Covered

                                                                                                                                                                                                                      • American Association of Individual Investors
                                                                                                                                                                                                                      • American Century Companies, Inc
                                                                                                                                                                                                                      • American Express Company (The)
                                                                                                                                                                                                                      • Ameriprise Financial Inc.
                                                                                                                                                                                                                      • Amtrust Financial
                                                                                                                                                                                                                      • Apple, Inc
                                                                                                                                                                                                                      • Argus
                                                                                                                                                                                                                      • Bank of America Corporation
                                                                                                                                                                                                                      • Bear Stearns
                                                                                                                                                                                                                      • Bed Bath & Beyond Inc
                                                                                                                                                                                                                      • Charles Schwab Corporation
                                                                                                                                                                                                                      • Credit Suisse First Boston LLC
                                                                                                                                                                                                                      • Employee Benefit Research Institute
                                                                                                                                                                                                                      • Euro RSCG Worldwide
                                                                                                                                                                                                                      • Federal Deposit Insurance Corporation
                                                                                                                                                                                                                      • Financial Services Authority (The)
                                                                                                                                                                                                                      • Firstrade Securities, Inc
                                                                                                                                                                                                                      • FMR Corp.
                                                                                                                                                                                                                      • Forex Capital Markets
                                                                                                                                                                                                                      • GAIN Capital Group, LLC
                                                                                                                                                                                                                      • Goldman Sachs Group, Inc., The
                                                                                                                                                                                                                      • Greenfield Online
                                                                                                                                                                                                                      • ING Direct
                                                                                                                                                                                                                      • ING Group
                                                                                                                                                                                                                      • J.D. Power and Associates
                                                                                                                                                                                                                      • JPMorgan Invest LLC (BrownCo)
                                                                                                                                                                                                                      • Ketchum
                                                                                                                                                                                                                      • Lehman Brothers Holdings Inc.
                                                                                                                                                                                                                      • Mediavest Worldwide Inc
                                                                                                                                                                                                                      • Merrill Lynch & Co. Inc
                                                                                                                                                                                                                      • Microsoft USA
                                                                                                                                                                                                                      • Morgan Stanley
                                                                                                                                                                                                                      • Morningstar, Inc.
                                                                                                                                                                                                                      • Muriel Siebert & Co., Inc
                                                                                                                                                                                                                      • North American Securities Administrators Association Inc
                                                                                                                                                                                                                      • Ogilvy & Mather Worldwide
                                                                                                                                                                                                                      • OppenheimerFunds, Inc.
                                                                                                                                                                                                                      • Palm Inc.
                                                                                                                                                                                                                      • Prudential Financial, Inc
                                                                                                                                                                                                                      • Research In Motion (USA)
                                                                                                                                                                                                                      • Reuters Group PLC
                                                                                                                                                                                                                      • Saks Incorporated
                                                                                                                                                                                                                      • Scottrade Inc.
                                                                                                                                                                                                                      • Scudder Investments
                                                                                                                                                                                                                      • Securities Industry Association (SIA)
                                                                                                                                                                                                                      • Securities Investor Protection Corporation
                                                                                                                                                                                                                      • ShareBuilder Corp.
                                                                                                                                                                                                                      • SunTrust Banks Inc.
                                                                                                                                                                                                                      • Symantec Corporation
                                                                                                                                                                                                                      • T-Mobile USA
                                                                                                                                                                                                                      • T. Rowe Price Group, Inc.
                                                                                                                                                                                                                      • TD Ameritrade Holding Corporation
                                                                                                                                                                                                                      • TD Waterhouse
                                                                                                                                                                                                                      • The Dreyfus Corporation
                                                                                                                                                                                                                      • The Vanguard Group, Inc.
                                                                                                                                                                                                                      • TowerGroup
                                                                                                                                                                                                                      • Twitter, Inc.
                                                                                                                                                                                                                      • U.S. Bureau of Labor Statistics
                                                                                                                                                                                                                      • U.S. Bureau of the Census
                                                                                                                                                                                                                      • U.S. Securities and Exchange Commission
                                                                                                                                                                                                                      • Universal McCann
                                                                                                                                                                                                                      • US Department of Commerce
                                                                                                                                                                                                                      • Wachovia Corporation
                                                                                                                                                                                                                      • Walmart Stores (USA)
                                                                                                                                                                                                                      • Wells Fargo & Company

                                                                                                                                                                                                                      Online Investing - US - July 2009

                                                                                                                                                                                                                      US $3,995.00 (Excl.Tax)