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Share Dealing - UK - October 2012

“Many UK adults still view sharedealing as the preserve of bankers in the City of London, or the highly affluent. Due to this prevailing attitude there are certain misconceptions regarding sharedealing, mainly towards the risk and complexity of equity-based investing. Although sharedealing is most certainly a higher risk strategy than keeping money in a savings account or cash ISA, the vast amount of information online means investors have plenty of resources to help shape their decisions and educate themselves about the market. In terms of complexity, trading actual shares has never been more simple or accessible. With the rise of mobile applications, traders can now execute transactions on the go in order to capitalise on any market movements or news. ”

– Stevan Obradovic, Financial Services Analyst

Some questions answered in this report include:

  • How can sharedealing firms appeal boost engagement with non-investors?
  • What are the prevailing consumer attitudes about sharedealing?
  • Are current market conditions beneficial or detrimental for sharedealing?
  • How many adults are considering investing in equity-based products in the next 12 months?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Stockbroker revenues expected to increase
              • Figure 1: Forecast for total revenues by stockbroking firms, 2007-17
            • XO account inactivity leads to closures, while the number of full-service portfolios grows
              • Figure 2: Number of accounts/portfolios held with execution-only and full service stockbrokers, 2007-11
            • Portfolio segmentation
              • Figure 3: Number of execution-only accounts/portfolios, by type, 2011
            • Trading activity
              • Market factors
                • Planned investment activity on the up
                  • Low interest rate environment could push more savers towards equities
                    • RDR starting to impact full-service stockbrokers
                      • Companies, brands and innovation
                        • Market share is dominated by a few providers
                          • Figure 4: Share of total revenues, by the five largest firms in each sector, 2006-11
                        • Brand promotion
                          • Who’s innovating?
                            • The consumer
                              • Value of savings and Investments
                                • Figure 5: Value of savings and investments, July 2012
                              • Investment portfolio
                                • Figure 6: Savings and investment portfolio, July 2012
                              • Account ownership and share acquisitions
                                • Figure 7: Sharedealing account ownership, July 2012
                              • Trading frequency
                                • Investment decisions
                                  • Figure 8: Investment decisions, July 2012
                                • Desirable features on XO services
                                  • Figure 9: Appealing features of an execution-only account, July 2012
                                • Investor sentiment
                                  • Figure 10: Savings and investment attitudes, July 2012
                                • What we think
                                • Issues in the Market

                                    • How can sharedealing firms appeal boost engagement with non-investors?
                                      • What are the prevailing consumer attitudes about sharedealing?
                                        • Are current market conditions beneficial or detrimental for sharedealing?
                                          • How many adults are considering investing in equity-based products in the next 12 months?
                                          • Trend Application

                                            • Rewarding potential investors
                                              • Spreading the risk
                                                • 2015: Old Gold
                                                • Market Drivers

                                                  • Key points
                                                    • Planned investor activity up sharply
                                                      • Figure 11: Intended purchases of shares and equity-based unit trusts, government and corporate bonds and bond-based unit trusts*, sales of equities and unit trusts and FTSE 100**, Q3/Q4 2002-Q3/Q4 2012
                                                    • Historically low interest rates could make shares a more appealing option
                                                      • Market volatility continues to present challenges and opportunities
                                                        • Figure 12: FTSE 100 and FTSE All Share – daily index movements, August 2007-August 2012
                                                      • Consumer confidence down in the last year
                                                        • Figure 13: GfK NOP Consumer Confidence Index, July 2006-July 2012
                                                      • Some signs that RDR is already having an impact on the market
                                                        • The rise of MiFID II and potential conflict with the RDR
                                                          • FSA targets rebate ban, which will encompass XO platforms
                                                            • Inflation figures starting to align with BoE target
                                                              • Figure 14: Monthly change in RPI and average weekly earnings, 2006-July 2012
                                                            • Savings accounts and cash ISA are still the preferred method of saving
                                                              • ISA accounts dominated by cash component
                                                                • Figure 15: Number of ISAs and amounts subscribed, segmented by type, 1999/2000-2011/12
                                                              • Minority of funds from stocks and shares ISAs invested in shares
                                                                • Figure 16: Market value of funds held in stocks and shares ISAs, 2011
                                                              • Number and value of buy-to-let loans up in 2011
                                                                • Figure 17: New buy-to-let mortgage business, 2001-11
                                                            • SWOT Analysis

                                                                • Figure 18: UK sharedealing market – SWOT analysis, 2012
                                                            • Who’s Innovating?

                                                              • Key points
                                                                • Mobile app development continues to spearhead innovation
                                                                  • Discount broker launches a low-cost Frequent Trader platform
                                                                    • Virtual trading games could help to boost interaction and demystify equities
                                                                      • CMC launches Chart Message Boards
                                                                        • IG Index partners with Aurasma in new campaign to explain its pricing technology
                                                                        • Market Size and Forecast

                                                                          • Key points
                                                                            • Stockbroking firms continued to grow revenues in 2011
                                                                              • Figure 19: Total revenues by stockbroking firms, 2007-12
                                                                            • Commission earnings declined in 2011
                                                                              • Figure 20: Stockbroking revenue streams, by firm type, 2010 and 2011
                                                                            • Inactivity has led to account closures and a decline in XO portfolios
                                                                              • Figure 21: Number of accounts/portfolios held with execution-only and full service stockbrokers, 2007-11
                                                                            • Value of assets remained relatively stable during 2011
                                                                              • Figure 22: Number of accounts and the value of assets managed, by execution-only and full service stockbrokers, 2007-11
                                                                            • Costs are significantly lower in proportion to revenues among XO brokers
                                                                              • Figure 23: Total costs as a proportion of total revenues, 2007-11
                                                                            • Market forecast
                                                                              • Stockbroking revenues expected to grow
                                                                                • Figure 24: Forecast for total revenues by stockbroking firms, 2007-17
                                                                                • Figure 25: Forecast for total revenues by stockbroking firms, 2007-17
                                                                              • Forecast methodology
                                                                                • Fan chart explanation
                                                                                • Portfolio Segmentation

                                                                                  • Key points
                                                                                    • Growth across most accounts, but first signs of RDR impact visible
                                                                                      • Figure 26: Number of accounts/portfolios, by value band – nominee accounts only, 2011
                                                                                    • Large drop in the number of certificated accounts during 2011
                                                                                      • Figure 27: Number of execution-only accounts/portfolios, by type, 2011
                                                                                    • Drop in active spreadbet and CFD accounts in Q4 2011
                                                                                      • Figure 28: Number of active spread bet and CFD accounts held by execution-only stockbrokers, Q1 2006-Q4 2011
                                                                                  • Trading Activity

                                                                                    • Key points
                                                                                      • Trade transactions by stockbrokers fell by 4.1% in 2011
                                                                                        • Figure 29: Number of stockbroker trades, by investment type, 2011
                                                                                      • Retail bargains fell by 5.8% in 2011
                                                                                        • Figure 30: Historical bargain volumes* (shown on a quarterly basis), Q1 1988-Q3 2011
                                                                                      • Purchases continued to exceed sales in 2011
                                                                                        • Figure 31: Bargain volumes*, by asset class, 2011
                                                                                    • Market Share

                                                                                      • Key points
                                                                                        • Top five XO brokers command 76% of total revenue
                                                                                          • Figure 32: Share of total revenues, by the five largest firms in each sector, 2006-11
                                                                                        • Hargreaves Lansdown continues to dominate the market
                                                                                          • Figure 33: Total revenues for selected stockbrokers, 2010 and 2011
                                                                                      • Companies and Products

                                                                                        • Key execution only firms:
                                                                                          • Barclays Stockbrokers
                                                                                              • Figure 34: Key financial data for Barclays Stockbrokers Ltd, 2010 and 2011
                                                                                            • Halifax Share Dealing
                                                                                                • Figure 35: Key financial data for Halifax Share Dealing, 2010 and 2011
                                                                                              • Hargreaves Lansdown
                                                                                                  • Figure 36: Key financial data for Hargreaves Lansdown, 2011 and 2012
                                                                                                • Selftrade
                                                                                                    • Figure 37: Key financial data for Selftrade, 2010 and 2011
                                                                                                  • The Share Centre
                                                                                                      • Figure 38: Key financial data for The Share Centre, 2010 and 2011
                                                                                                    • TD Direct Investing
                                                                                                        • Figure 39: Key financial data for TD Direct Investing Ltd, 2010 and 2011
                                                                                                      • Key spread betting firms:
                                                                                                        • Capital Spreads
                                                                                                            • Figure 40: Key financial data for London Capital Group Plc, 2010 and 2011
                                                                                                          • City Index/Finspreads
                                                                                                              • Figure 41: Key financial data for City Index Ltd, 2010 and 2011
                                                                                                            • CMC Markets
                                                                                                                • Figure 42: Key financial data for CMC Markets Plc, 2011 and 2012
                                                                                                              • IG Index
                                                                                                                  • Figure 43: Key financial data for IG Index Ltd, 2010 and 2011
                                                                                                              • Brand Communication and Promotion

                                                                                                                • Key points
                                                                                                                  • Adspend on investment products and services down by a fifth
                                                                                                                    • Figure 44: Total advertising expenditure on investment products and services, by product category, 2007/08-2011/12
                                                                                                                  • Top five advertisers account for almost 60% of stockbroker/sharedealing adspend
                                                                                                                    • Figure 45: Top ten advertisers – stockbrokers and sharedealing only, 2008/09-2011/12
                                                                                                                  • Popularity of internet-based advertising continues to increase
                                                                                                                    • Figure 46: Total advertising by stockbrokers and sharedealers only, by media type, 2008/09-2011/12
                                                                                                                • Channels to Market

                                                                                                                  • Key points
                                                                                                                    • Buying and selling shares
                                                                                                                      • Share ownership can be from passive or active acquisitions
                                                                                                                        • Over half of full-service broker client funds under discretionary management
                                                                                                                          • Figure 47: Full-service stockbroker assets, by management channel, 2008-11
                                                                                                                        • Online trading dominates the XO segment
                                                                                                                          • Figure 48: Online trades as a percentage of execution-only trades, 2007-11
                                                                                                                      • Value of Savings and Investments

                                                                                                                        • Key points
                                                                                                                          • The majority of consumers have some savings and investments
                                                                                                                            • Figure 49: Value of savings and investments, July 2012
                                                                                                                          • Older consumers are more likely to have higher value portfolios
                                                                                                                            • Figure 50: Value of savings and investments, by age, July 2012
                                                                                                                          • Household income dictates the value of savings and investments…
                                                                                                                            • Figure 51: Value of savings and investments, by gross annual household income, July 2012
                                                                                                                          • …and home ownership also has an impact
                                                                                                                            • Figure 52: Value of savings and investments, by housing situation, July 2012
                                                                                                                        • Investment Portfolio

                                                                                                                          • Key points
                                                                                                                            • Risk-free and familiar savings products are most popular…
                                                                                                                              • Figure 53: Savings and investment portfolio, July 2012
                                                                                                                            • …with only a quarter of adults owning equity-based investments
                                                                                                                              • Affluence, age and gender continues to influence ownership of equity-based investments
                                                                                                                                • Ownership is higher among men, but interest is similar between the sexes
                                                                                                                                  • Figure 54: Savings and investing portfolio, by gender, July 2012
                                                                                                                                • High-net worth clients most likely to have equity-based investments
                                                                                                                                  • Figure 55: Savings and investment portfolio, by value of savings and investments, July 2012
                                                                                                                              • Account Ownership and Share Acquisitions

                                                                                                                                • Key points
                                                                                                                                  • Around 9% of UK adults have a sharedealing account
                                                                                                                                    • Figure 56: Sharedealing account ownership, July 2012
                                                                                                                                  • Sharedealing accounts popular among 16-34-year-old equity investors
                                                                                                                                    • Figure 57: Sharedealing account ownership, by age, July 2012
                                                                                                                                  • Share acquisitions driven by self-trading
                                                                                                                                    • Figure 58: Share acquisitions, July 2012
                                                                                                                                  • Accountholders more likely to have self-purchased investments
                                                                                                                                    • Figure 59: Share acquisitions, by sharedealing account ownership, July 2012
                                                                                                                                • Trading Frequency

                                                                                                                                  • Key points
                                                                                                                                    • Almost a third of equity-based investors trade on a monthly basis
                                                                                                                                      • Figure 60: Sharedealing frequency, July 2012
                                                                                                                                    • Gender has an impact on sharedealing and investment activity
                                                                                                                                      • Figure 61: Sharedealing frequency, by gender, July 2012
                                                                                                                                    • 16-34-year-olds are most likely to trade frequently
                                                                                                                                      • Figure 62: Sharedealing frequency, by age, July 2012
                                                                                                                                    • Trading activity higher among sharedealing account holders
                                                                                                                                      • Figure 63: Sharedealing frequency, by sharedealing account ownership, July 2012
                                                                                                                                  • Investment Decisions

                                                                                                                                    • Key points
                                                                                                                                      • A minority seek advice when making savings and investment decisions
                                                                                                                                        • Figure 64: Investment decisions, July 2012
                                                                                                                                      • High-net worth investors are more likely to use professional advice
                                                                                                                                        • Figure 65: Investment decisions, by value of savings and investments, July 2012
                                                                                                                                      • Likelihood to obtain professional advice varies between products
                                                                                                                                        • Figure 66: Investment decisions, by savings and investment portfolio, July 2012
                                                                                                                                    • Desirable Features on Execution-Only Services

                                                                                                                                      • Key points
                                                                                                                                        • Low costs are most important features of an XO share-dealing service
                                                                                                                                          • Figure 67: Appealing features of an execution-only account, July 2012
                                                                                                                                        • Costs are even more important to current investors
                                                                                                                                          • Figure 68: Appealing features of an execution-only account, by savings and investment portfolio, July 2012
                                                                                                                                        • Infrequent traders more likely to prioritise low costs and no inactivity charges
                                                                                                                                          • Figure 69: Appealing features of an execution-only account, by sharedealing frequency, July 2012
                                                                                                                                      • Investor Sentiment

                                                                                                                                        • Key points
                                                                                                                                          • Current economic environment making extra savings difficult
                                                                                                                                            • Figure 70: Savings and investment attitudes, July 2012
                                                                                                                                          • Perceived product complexity and risk is a barrier for some consumers
                                                                                                                                            • Women are more risk-averse and less influenced by low interest rates
                                                                                                                                              • Figure 71: Savings and investment attitudes, by gender and age, July 2012
                                                                                                                                            • Affluent investors are more confident in sharedealing
                                                                                                                                              • Figure 72: Savings and investment attitudes, by gross annual household income, July 2012
                                                                                                                                            • Even equity-based investors are tentative about sharedealing
                                                                                                                                              • Figure 73: Savings and investment attitudes, by sharedealing frequency, July 2012
                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                              • Figure 74: Best and worst case forecast for total revenues by stockbroking firms, 2012-17
                                                                                                                                          • Appendix – Value of Savings and Investments

                                                                                                                                              • Figure 75: Value of savings and investments, by demographics, July 2012
                                                                                                                                              • Figure 76: Value of savings and investments, by demographics, July 2012
                                                                                                                                          • Appendix – Investment Portfolio

                                                                                                                                              • Figure 77: Savings account/Cash ISA ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 78: Company pension ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 79: NS&I product ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 80: Personal pension ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 81: Equity-based investments ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 82: Individual company shares ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 83: With-profits, unit-linked, money market, distribution or guaranteed investment bond ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 84: Investment trust ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 85: Unit trust/OEIC ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 86: Investment property ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 87: SIPP ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 88: Financial spread-betting account ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 89: ETF (exchange-traded fund) ownership/intentions, by demographics, July 2012
                                                                                                                                              • Figure 90: Other savings or investments ownership/intentions, by demographics, July 2012
                                                                                                                                          • Appendix – Account Ownership and Share Acquisitions

                                                                                                                                              • Figure 91: Sharedealing account ownership, by demographics, July 2012
                                                                                                                                              • Figure 92: Circumstances of share ownership, by demographics, July 2012
                                                                                                                                          • Appendix – Trading Frequency

                                                                                                                                              • Figure 93: Sharedealing frequency, by demographics, July 2012
                                                                                                                                          • Appendix – Investment Decisions

                                                                                                                                              • Figure 94: Investment decisions, by demographics, July 2012
                                                                                                                                          • Appendix – Desirable Features on Execution-Only Services

                                                                                                                                              • Figure 95: Most popular appealing features of an execution-only account, by demographics, July 2012
                                                                                                                                              • Figure 96: Appealing features of an execution-only account, by demographics, July 2012
                                                                                                                                          • Appendix – Investor Sentiment

                                                                                                                                              • Figure 97: Agreement with the statement ‘I find it difficult to add to my savings or investments at the moment’, by demographics, July 2012
                                                                                                                                              • Figure 98: Agreement with the statement ‘The current environment is too volatile for buying/selling shares’, by demographics, July 2012
                                                                                                                                              • Figure 99: Agreement with the statement ‘Investing in shares is too risky’, by demographics, July 2012
                                                                                                                                              • Figure 100: Agreement with the statement ‘Investing in shares is too complicated’, by demographics, July 2012
                                                                                                                                              • Figure 101: Agreement with the statement ‘It is necessary to take on some risk to get decent returns’, by demographics, July 2012
                                                                                                                                              • Figure 102: Agreement with the statement ‘Low interest rates have made me more interested in sharedealing’, by demographics, July 2012

                                                                                                                                          Companies Covered

                                                                                                                                          • Amazon.co.uk
                                                                                                                                          • Barclays Bank plc
                                                                                                                                          • Barclays Stockbrokers Limited
                                                                                                                                          • Capital Spreads
                                                                                                                                          • City Index
                                                                                                                                          • CMC Group plc
                                                                                                                                          • Cofunds
                                                                                                                                          • Forex Capital Markets
                                                                                                                                          • Goodbody Stockbrokers
                                                                                                                                          • Halifax Mortgage Services
                                                                                                                                          • Hargreaves Lansdown Plc
                                                                                                                                          • ICAP
                                                                                                                                          • IFX Markets
                                                                                                                                          • IG Group
                                                                                                                                          • Lloyds Banking Group
                                                                                                                                          • London Capital Group
                                                                                                                                          • NatWest
                                                                                                                                          • Royal Bank of Scotland Group plc
                                                                                                                                          • Selftrade Investments
                                                                                                                                          • Société Générale Group
                                                                                                                                          • Talos Securities Ltd
                                                                                                                                          • TD Direct Investing
                                                                                                                                          • TD Waterhouse
                                                                                                                                          • The Share Centre
                                                                                                                                          • Toronto-Dominion Bank

                                                                                                                                          Share Dealing - UK - October 2012

                                                                                                                                          US $2,583.33 (Excl.Tax)