Share Dealing - UK - October 2013
“A lack of financial education has caused many consumers to lack the confidence to make financial decisions. Many see shares as high-risk financial products that are beyond their understanding. With interest rates expected to remain low for the foreseeable future, these consumers are losing money due to the impact of inflation. Online developments have helped to make share ownership easier for consumers, providers now need to harness these developments to teach consumers about how to manage their finances better, improve their savings habits and learn about share dealing.”
– Alexander Hiscox, Senior Financial Services Analyst
Some questions answered in this report include:
- How has the RDR affected advised share dealing providers?
- Should X-O providers stop producing research articles?
- What will change consumer attitudes towards risk?
- How should share dealing providers look to attract new customers?
Share dealing revenues grew by 2.8% in 2012. However, this was mainly led by Hargreaves Lansdown, with a number of large providers reporting decreases in revenue. Revenue decreases were primarily due to a decrease in trading transactions. A reduction in trading transactions can be potentially damaging to X-O firms, as they rely on dealing charges for the majority of their revenues.
X-O share dealing has grown over the past 10 years, as the internet has made it easier for consumers to manage their accounts and research shares online. The success of Hargreaves Lansdown illustrates this perfectly, growing revenues from £40 million in 2004 to £292 million in 2013. However, the industry faces a number of challenges which it needs to overcome if it is to continue to attract new investors. Consumers suffer from an oversensitivity to risk, a lack of financial education to make independent investment decisions and savings which are too low to make it worthwhile investing.
This report examines the UK share dealing market, focusing on execution-only and full-service stockbroking firms. Analysis focuses on some of the key developments in the market, while looking at the impact of economic and regulatory challenges. This report also provides analysis of the revenues of stockbroking firms and the value of assets under management, with a forecast showing the expected revenue growth over the next five years. The report concludes with Mintel’s exclusively commissioned research looking at product ownership, consumer investment strategies, attitudes towards risk, the features that consumers look for in a share dealing service and insight into how consumers make investment decisions.
Share dealing – a term used to describe the buying and selling (or ‘trading’) of stocks and shares.
Stockbroker – a firm that trades in stocks and shares, as well as other financial instruments such as derivatives, on behalf of private clients (eg individuals, trusts and charities) for commission. A range of services may be offered, from execution-only trading (no advice) through to full portfolio management.
The stockbroking market comprises two distinct types of firm:
Full service stockbrokers – which focus on private client discretionary and advisory business, often supplemented by wider financial planning services
Execution only stockbrokers (X-O) – which offer telephone and online dealing, providing execution and custody services, often at a lower cost than full service broker firms.
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