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Share Dealing - UK - October 2014

“Consumers can find share dealing daunting at first. This presents a barrier, preventing some would-be investors from entering the market. Providers need to make the application process as clear, simple and jargon free as possible, and should use technology to make this happen.”
– Alex Hiscox, Senior Analyst – Financial Services


This report looks at the following issues:

  • Banks can leverage their strong brands to compete in offering share dealing services
  • Direct discretionary could emerge as a competitor to share dealing
  • The proliferation of IPOs can drive growth in the share dealing market
  • Making share dealing less daunting to new investors

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Table of contents

  1. Introduction

      • Market definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Stock broker revenues expected to continue to increase to 2019
                • Figure 1: Forecast for total revenues by stockbroking firms, 2009-19
              • Royal mail IPO lead to an increase in the number of new account openings
                • Figure 2: X-O account openings, 2007-13
              • Portfolio segmentation
                • Figure 3: Total percentage change in the number of accounts/portfolios, by value band – nominee accounts only, 2013
              • The value of X-O assets managed has doubled since 2009
                • Figure 4: Value of assets managed, by execution-only and full-service stockbrokers, 2009-13
              • Trade volumes increase for the first time in three years
                • Figure 5: Historical trade volumes for X-O stockbrokers (millions)
              • Market factors
                • Wage stagnation eroding consumers’ disposable income
                  • Global stocks markets exceed pre-recession levels
                    • Low cash interest rates continue to make equity investment more attractive
                      • Increase in number of IPOs is boosting awareness of share dealing
                        • NISAs expected to help encourage more consumers to dabble in equities
                          • Companies, brands and innovation
                            • Hargreaves Lansdown increases its share of the X-O share dealing market
                              • Figure 6: Total revenues for selected stockbrokers, 2013 (Year ending 31 December – unless otherwise stated)
                            • Brand promotion
                              • Who’s innovating?
                                • The consumer
                                  • Ownership of share dealing accounts
                                    • Figure 7: Ownership of share dealing accounts, June 2014
                                  • Reasons for not owning a share dealing account
                                    • Figure 8: Reasons for not owning a share dealing account, June 2014
                                  • Reasons for choosing a share dealing provider
                                    • Figure 9: Reasons for choosing share dealing provider, June 2014
                                  • Attitudes towards share dealing
                                    • Figure 10: Attitudes towards share dealing, June 2014
                                  • Interest in investing in stock market flotations
                                    • Figure 11: Interest in investing in stock market flotations, June 2014
                                  • What we think
                                  • Issues and Insights

                                      • Banks can leverage their strong brands to compete in offering share dealing services
                                        • The facts
                                          • The implications
                                            • Direct discretionary could emerge as a competitor to share dealing
                                              • The facts
                                                • The implications
                                                  • The proliferation of IPOs can drive growth in the share dealing market
                                                    • The facts
                                                      • The implications
                                                        • Making share dealing less daunting to new investors
                                                          • The facts
                                                            • The implications
                                                            • Trend Application

                                                              • Share dealing providers can capitalise on the social value of financial education
                                                                • Providers can leverage the influence of their advocates
                                                                  • Mintel Futures: Access Anything Anywhere
                                                                  • Market Drivers

                                                                    • Key points
                                                                      • Higher earners are avoiding the worst of the income squeeze
                                                                        • Figure 12: Annual % change in average weekly earnings, CPI and RPI, March 2009 – July 2014
                                                                        • Figure 13: “How have your finances changed over the last 12 months?”, by household income, September 2014
                                                                      • Global stocks markets exceed pre-recession levels
                                                                        • Figure 14: Performance of Nikkei 225, FTSE 100 and S&P 100, January 2003-July 2014
                                                                      • Low cash interest rates continue to make equity investment more attractive
                                                                        • Increase in number of IPOs is boosting awareness of share dealing
                                                                          • Figure 15: Number of IPOs on the UK Main Market, 2006-14
                                                                        • The RDR has pushed smaller investors to X-O share dealing platforms
                                                                          • FCA’s thematic review finds uncertainty around definitions of advice
                                                                            • The 2014 Budget changes
                                                                              • ISAs
                                                                                • Annuities
                                                                                  • End of the distinction between cash and equity ISAs will benefit share dealing providers
                                                                                    • Figure 16: Number of ISAs and amounts subscribed, segmented by type, 2005/06-2013/14
                                                                                  • Increased investment in ISAs will mainly go to OEICs and Unit Trusts
                                                                                    • Figure 17: Market value of funds held in stocks and shares ISAs, 2012-14
                                                                                  • Housing is a popular investment for consumers
                                                                                    • Figure 18: New buy-to-let mortgage business, 2007-13
                                                                                • SWOT Analysis

                                                                                    • Figure 19: UK share dealing market – SWOT Analysis 2014
                                                                                • Who’s Innovating?

                                                                                  • Key points
                                                                                    • Charles Stanley launches January sale
                                                                                      • Interactive Investor to partner with companies wanting to offer share dealing services
                                                                                        • Hargreaves Lansdown set to launch direct-to-consumer discretionary service
                                                                                          • IG Group launches international share dealing platform
                                                                                            • Firms from the US are looking to disrupt the self-directed investing market
                                                                                              • True Potential launches ImpulseSave to help customers to save and invest more
                                                                                              • Market Size and Forecast

                                                                                                • Key points
                                                                                                  • X-O stockbroking firms continue to grow steadily in 2014
                                                                                                    • Figure 20: Total revenues by stockbroking firms, 2009-14
                                                                                                  • Inactivity and regular fees account for an increasing proportion of X-O revenues
                                                                                                    • Figure 21: Stockbroking revenue streams, by firm type, 2013 and 2014
                                                                                                  • Assets under management continue to increase, buoyed by strong stock market performance
                                                                                                    • Figure 22: Value of assets managed, by execution-only and full-service stockbrokers, 2009-13
                                                                                                    • Figure 23: Amount of savings and investments, by share dealing ownership, June 2013
                                                                                                  • The number of new accounts increased dramatically in 2013
                                                                                                    • Figure 24: X-O account openings, 2007-13
                                                                                                  • Share dealing revenue expected to grow over the next five years
                                                                                                    • Figure 25: Forecast for total revenues by stockbroking firms, 2009-19
                                                                                                    • Figure 26: Forecast for total revenues by stockbroking firms, 2009-19
                                                                                                  • Forecast methodology
                                                                                                    • Fan chart explanation
                                                                                                    • Portfolio Segmentation

                                                                                                      • Key points
                                                                                                        • Investors with less than £50,000 pushed towards X-O channels
                                                                                                          • Figure 27: Number of accounts/portfolios, by value band – nominee accounts only, 2013
                                                                                                        • Over half of X-O assets are held in tax wrappers
                                                                                                          • Figure 28: Assets by ownership as a proportion of total investment assets for X-O accounts, 2012 and 2013
                                                                                                      • Trading Activity

                                                                                                        • Key points
                                                                                                          • Trade volumes increase for the first time in three years
                                                                                                            • Figure 29: Historical trade volumes for X-O stockbrokers (millions)
                                                                                                          • Trading activity is bullish as purchases outpaced sales in 2013
                                                                                                            • Figure 30: Historical bargain volumes* Q1 1998 – Q4 2013
                                                                                                          • Investors have become more cautious about overseas equities
                                                                                                            • Figure 31: Bargain volumes, by asset class, 2012 and 2013
                                                                                                        • Market Share

                                                                                                          • Key points
                                                                                                            • Hargreaves Lansdown increases its share of the X-O share dealing market
                                                                                                              • Figure 32: Total revenues for selected stockbrokers, 2011-13
                                                                                                              • Figure 33: Total revenues for Hargreaves Lansdown, 2011-14
                                                                                                            • Top five firms continue to dominate the X-O market
                                                                                                              • Figure 34: Share of total revenue, by the largest firms in each sector, 2010-13
                                                                                                          • Companies and Products

                                                                                                            • X-O stock broking charges
                                                                                                              • Figure 35: Charges of the eight largest stockbrokers*, September 2014
                                                                                                            • Barclays Stockbrokers
                                                                                                              • Description
                                                                                                                • Product range
                                                                                                                  • Financial performance
                                                                                                                    • Figure 36: Key financial for Barclays Stockbrokers Limited, 2012 and 2013
                                                                                                                  • Recent activity
                                                                                                                    • Halifax Share Dealing
                                                                                                                      • Description
                                                                                                                        • Product range
                                                                                                                          • Financial performance
                                                                                                                            • Figure 37: Key financials for Halifax Share Dealing Limited, 2012 and 2013
                                                                                                                          • Recent activity
                                                                                                                            • Hargreaves Lansdown
                                                                                                                              • Description
                                                                                                                                • Product range
                                                                                                                                  • Financial performance
                                                                                                                                    • Figure 38: Key financials for Hargreaves Lansdown, 2012-14
                                                                                                                                  • Recent activity
                                                                                                                                    • Selftrade
                                                                                                                                      • Description
                                                                                                                                        • Product range
                                                                                                                                          • Financial performance
                                                                                                                                            • Figure 39: Key financials for Talos Securities Ltd, 2012 and 2013
                                                                                                                                          • Recent activity
                                                                                                                                            • The Share Centre
                                                                                                                                              • Description
                                                                                                                                                • Product range
                                                                                                                                                  • Financial performance
                                                                                                                                                    • Figure 40: Key financials for The Share Centre Limited, 2012 and 2013
                                                                                                                                                  • TD Direct Investing
                                                                                                                                                    • Description
                                                                                                                                                      • Product range
                                                                                                                                                        • Financial performance
                                                                                                                                                          • Figure 41: Key financials for TD Direct Investing, 2012 and 2013
                                                                                                                                                        • Recent activity
                                                                                                                                                        • Brand Communication and Promotion

                                                                                                                                                          • Key points
                                                                                                                                                            • Advertising expenditure decreases in 2013/14 due to lower market volatility
                                                                                                                                                              • Figure 42: Total value of share dealing advertising, 2009/10-2013/14
                                                                                                                                                            • Share dealing companies focus on advertising to wealthier, over-45s
                                                                                                                                                              • Figure 43: Top 10 advertisers – stockbrokers and share dealing only, 2009/10-2013/14
                                                                                                                                                            • Press becomes the most popular advertising channel for share dealing providers
                                                                                                                                                              • Figure 44: Total advertising by stockbrokers, share dealers and stocks and shares ISA providers, by media type, 2009/10-2013/14
                                                                                                                                                            • A note about adspend
                                                                                                                                                            • Channels to Market

                                                                                                                                                              • Key points
                                                                                                                                                                • The value of non-managed assets overtook advisory assets in 2013
                                                                                                                                                                  • Figure 45: Full-service stockbroker assets, by management channel, 2009-13
                                                                                                                                                                • The proportion of online trades fall due to stock market stability
                                                                                                                                                                  • Figure 46: Online trades as a percentage of X-O trades, 2008-2013
                                                                                                                                                              • Ownership of Share Dealing Accounts

                                                                                                                                                                • Key points
                                                                                                                                                                  • X-O share dealing accounts remain a niche product
                                                                                                                                                                    • Figure 47: Ownership of share dealing accounts, June 2014
                                                                                                                                                                  • Broadening the appeal of share dealing will come with challenges
                                                                                                                                                                    • Targeting long-term investors will help to make share dealing appeal to a broader audience
                                                                                                                                                                      • Figure 48: Ownership of Share dealing accounts, by gender, June 2014
                                                                                                                                                                    • Under-35s are more likely to be interested in opening a share dealing account in future
                                                                                                                                                                      • Figure 49: Ownership of Share dealing accounts, by age, June 2014
                                                                                                                                                                    • Many consumers prefer to invest in property than the stock market
                                                                                                                                                                      • X-O share dealing has not democratised ownership of investments
                                                                                                                                                                        • Figure 50: Ownership of Share dealing accounts, by gross annual income and current financial situation, June 2014
                                                                                                                                                                    • Reasons for Not Owning a Share Dealing Account

                                                                                                                                                                      • Key points
                                                                                                                                                                        • Affordability is the biggest barrier to share dealing ownership
                                                                                                                                                                          • Figure 51: Reasons for not owning a share dealing account, June 2014
                                                                                                                                                                        • Education can help to improve the appeal of share dealing
                                                                                                                                                                          • Providers could benefit from making the account opening process more straightforward
                                                                                                                                                                            • Figure 52: Reasons for not owning a share dealing account, by Ownership of Share dealing accounts, June 2014
                                                                                                                                                                          • Younger consumers expect share dealing to be time consuming
                                                                                                                                                                            • Figure 53: Reasons for not owning a share dealing account, by age, June 2014
                                                                                                                                                                        • Reasons for Choosing a Share Dealing Provider

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Low charges are the key to attracting new consumers
                                                                                                                                                                              • Figure 54: Reasons for choosing share dealing provider, June 2014
                                                                                                                                                                            • Share dealing providers can benefit from offering simple charging structures
                                                                                                                                                                              • A quarter of share dealers want their provider to be a well-known brand
                                                                                                                                                                                • A customised online approach can make share dealing seem less daunting
                                                                                                                                                                                  • Sometimes it’s better to have less choice, not more
                                                                                                                                                                                    • Trading apps will become increasingly important
                                                                                                                                                                                    • Attitudes towards Share Dealing

                                                                                                                                                                                      • Key points
                                                                                                                                                                                        • Share dealers are aware of the impact of low interest rates
                                                                                                                                                                                          • Figure 55: Attitudes towards share dealing, June 2014
                                                                                                                                                                                        • 61% of X-O share dealers enjoy trading
                                                                                                                                                                                          • Investors show appetite for AIM-listed shares, but must be advised of the risk
                                                                                                                                                                                            • Half of share dealing customers express interest in international shares
                                                                                                                                                                                              • Advised share dealers are more likely to want to be long-term investors
                                                                                                                                                                                                • Figure 56: Attitudes towards share dealing, by Ownership of Share dealing accounts, June 2014
                                                                                                                                                                                              • Falling stock markets may be problematic for providers if they don’t take the time to educate their customers
                                                                                                                                                                                              • Interest in Investing in Stock Market Flotations

                                                                                                                                                                                                • Key points
                                                                                                                                                                                                  • IPOs can help to get non-hobbyist investors into share dealing
                                                                                                                                                                                                    • Figure 57: Interest in investing in stock market flotations, June 2014
                                                                                                                                                                                                  • 16% were tempted to purchase shares, but decided not to
                                                                                                                                                                                                    • Three fifths of existing customers have invested in a company flotation
                                                                                                                                                                                                      • Figure 58: Interest in investing in stock market flotations, by Ownership of Share dealing accounts, June 2014
                                                                                                                                                                                                    • For the hard-pressed, share dealing is a luxury they can’t afford
                                                                                                                                                                                                      • Figure 59: Interest in investing in stock market flotations, by demographics, June 2014

                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                  To learn more about the companies covered in this report please contact us.

                                                                                                                                                                                                  Share Dealing - UK - October 2014

                                                                                                                                                                                                  £1,995.00 (Excl.Tax)