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Share Dealing - UK - October 2015

“Share dealing appeals to a wider range of people than might be expected. This is the case both in the numbers of people who hold a share dealing account, as well as those who aspire to have an account in the future. At the same time, the execution-only channel is becoming increasingly important, as many retail investors are finding accessing financial advice prohibitively expensive. If providers are to take advantage of the growing interest in share dealing they will need to ensure their services and supplementary research tools are simple enough to translate to online and mobile platforms, and affordable to mainstream investors.”
– Sarah Hitchcock, Senior Analyst – Financial Services

This report discusses the following key topics:

  • Shift towards self-directed investing will continue, supported by new digital technology
  • Fairly good new business prospects over the immediate term
  • New opportunities linked to pension reform

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this report
      • Executive Summary

          • The market
            • Solid revenue growth should prevail
              • Figure 1: Forecast of total revenues by stockbroking firms, at current prices – Fan chart, 2010-20
            • Sub-sector performance
              • Figure 2: Key sector data, 2014
            • Volume of active execution-only accounts up 10% in 2014
              • Low cash returns and new pension freedoms boost activity
                • Companies and brands
                  • A heavily consolidated marketplace
                    • Figure 3: Share of total revenues by the five largest firms in each sector, 2011-14
                  • The consumer
                    • 17% of adult online users own a share dealing account
                      • Figure 4: Ownership of share dealing or spread betting accounts, July 2015
                    • 59% of which trade at least once a month
                      • Figure 5: Trading frequency, July 2015
                    • 85% access their accounts online
                      • Figure 6: Method of accessing share dealing or spread betting account, July 2015
                    • 17% of adult internet users are interested in opening an account within the next year
                      • Figure 7: Interest in opening an account within the coming year, July 2015
                    • Many accountholders only have modest savings
                      • Figure 8: Level of investible assets by those with a share dealing or spread betting account, July 2015
                    • 47% of accountholders are seeking income from their investments
                      • Figure 9: Agreement with statements about investing by share dealing and spread betting accountholders, July 2015
                    • 30% of accountholders plan to increase their share/investment holdings over their coming year
                      • Figure 10: Expected investment activity over the next 12 months, July 2015
                    • What we think
                    • Issues and Insights

                      • Shift towards self-directed investing will continue, supported by new digital technology
                        • The facts
                          • The implications
                            • Fairly good new business prospects over the immediate term
                              • The facts
                                • The implications
                                  • New opportunities linked to pension reform
                                    • The facts
                                      • The implications
                                      • The Market – What You Need to Know

                                        • Mixed performance indicators
                                          • Strong rise in the number of active execution-only accounts
                                            • Trading levels maintained in 2014, following large increase in 2013
                                              • Growth in trades via mobile apps
                                                • Ongoing market volatility and low returns on cash boosts appeal of self-directed trading
                                                  • Pension reforms have potential to boost retail investment activity
                                                  • Market Size and Forecast

                                                    • Full service firms are performing better than their execution-only counterparts
                                                      • Figure 11: Total revenues by execution-only stockbrokers and full service wealth managers, 2010-14
                                                    • Revenue streams vary between firm types
                                                      • Figure 12: Business revenue streams, by type of firm, 2013 and 2014
                                                    • Margins under rising cost pressure
                                                      • Figure 13: Costs as a proportion of revenues, by execution-only stockbrokers and full service wealth managers, 2011-14
                                                    • Market forecast
                                                      • Figure 14: Forecast of total revenues by stockbroking firms, at current prices – Fan chart, 2010-20
                                                      • Figure 15: Forecast of total revenues by stockbroking firms, at current and constant prices, 2015-20
                                                  • Number of Client Accounts and Value of Investment Assets

                                                    • Single-digit asset growth in 2014
                                                      • Figure 16: Value of assets, by type of firm, 2011-14
                                                    • 2014 saw a 10% growth in active execution-only accounts
                                                      • Figure 17: Number of client accounts/portfolios, by type of firm, 2013 and 2014
                                                    • Strong growth in ultra-affluent full service clients
                                                      • Figure 18: Number of nominee accounts, by value band and type of firm, 2014
                                                    • New execution-only account openings boosted by market volatility and IPOs
                                                      • Figure 19: New execution-only accounts opened annually, 2008-14
                                                  • Trading Activity

                                                    • Volume of private-client trades up a fraction in 2014…
                                                      • Figure 20: Number of stockbroker trades, by investment type, 2014
                                                    • …although trading activity gets a boost from ongoing market volatility…
                                                      • Figure 21: Number of execution-only trades, 2004-14
                                                    • …and greater investor appetite
                                                    • Channels to Market

                                                      • There are three main ways to access share dealing services
                                                        • Execution-only channel continues to grow, buoyed by a shift towards self-directed investing
                                                          • Online trades account for majority of business…
                                                            • …while a growing proportion is moving to mobile devices
                                                              • Figure 22: Online versus offline trades as a percentage of total execution-only trades, 2011-14
                                                            • Passive versus active acquisition
                                                            • Market Drivers

                                                              • Stock market experiencing renewed turbulence
                                                                • Fall in inflation delays increase in interest rates
                                                                • Regulatory and Legislative Changes

                                                                  • Increased pension freedoms create new opportunities
                                                                    • An end to new referral payments
                                                                      • Platforms introduce ‘clean’ fund pricing
                                                                        • Changes to CASS put additional pressure on brokers and asset managers
                                                                          • MiFID II aims to improve investor confidence
                                                                          • Key Players – What You Need to Know

                                                                            • The UK stockbroking market is highly concentrated
                                                                              • Recent execution-only activity has focused on developing new mobile apps and updating pricing models
                                                                                • Stockbrokers cut their investment in above-the-line media…
                                                                                  • …but are making growing use of new forms of digital and social media
                                                                                  • Market Share

                                                                                    • Mixed performance between the main stockbrokers
                                                                                      • Figure 23: Revenues for selected stockbrokers, 2011 -14
                                                                                    • Top five in each sector claim over 70% of sector revenues
                                                                                      • Figure 24: Share of total revenues by the five largest firms in each sector, 2011-14
                                                                                  • Company Profiles – Top Five Execution-only Brokers

                                                                                    • Hargreaves Lansdown
                                                                                      • Description
                                                                                        • Share dealing proposition
                                                                                          • Key financial data
                                                                                            • Figure 25: Hargreaves Lansdown – Key annual data, 2013-15
                                                                                          • Recent activity
                                                                                            • Corporate strategy
                                                                                              • Barclays Stockbrokers
                                                                                                • Description
                                                                                                  • Share dealing proposition
                                                                                                    • Key financial data
                                                                                                      • Figure 26: Barclays Stockbrokers Ltd – Key annual data, 2012-14
                                                                                                    • Recent activity
                                                                                                      • Corporate strategy
                                                                                                        • TD Direct Investing
                                                                                                          • Description
                                                                                                            • Share dealing proposition
                                                                                                              • Key financial data
                                                                                                                • Figure 27: TD Direct Investing Ltd – Key annual data, 2012-14
                                                                                                              • Recent activity and corporate strategy
                                                                                                                • Equiniti Financial Services
                                                                                                                  • Description
                                                                                                                    • Share dealing proposition
                                                                                                                      • Key financial data
                                                                                                                        • Figure 28: Equiniti Financial Services – Key annual data, 2012-14
                                                                                                                      • Recent activity
                                                                                                                        • Halifax Share Dealing
                                                                                                                          • Description
                                                                                                                            • Share dealing proposition
                                                                                                                              • Key financial data
                                                                                                                                • Figure 29: Halifax Share Dealing Limited – Key annual data, 2012-14
                                                                                                                              • Significant others
                                                                                                                              • Advertising and Marketing Activity

                                                                                                                                • Sharp fall in adspend by share dealing providers
                                                                                                                                  • Figure 30: Recorded above-the-line, direct mail and online display total advertising expenditure on investment products and services, by sub-category, 2011-15
                                                                                                                                • Spread betting firm City Index is once again the highest-spending advertiser in its category
                                                                                                                                  • Figure 31: Top 10 above-the line, direct mail and online display advertisers of stockbroking/share dealing and financial spread betting services, 2013-15
                                                                                                                                • Online advertising accounts for a large chunk of market adspend
                                                                                                                                  • Figure 32: Total above-the line, direct mail and online display advertising of stockbroking/share dealing and financial spread betting services, by media type, 2013-15
                                                                                                                                • Nielsen Media Research coverage
                                                                                                                                • The Consumer – What You Need to Know

                                                                                                                                  • 17% of adult internet users have a share dealing account
                                                                                                                                    • 85% of share dealing customers access their accounts online
                                                                                                                                      • 17% of adult internet users are interested in opening a share dealing or spread betting account within the coming year
                                                                                                                                        • 44% of share dealing accountholders have investible assets of £30,000+
                                                                                                                                          • 64% of clients closely monitor investment performance
                                                                                                                                            • 35% of active traders plan to buy shares while just 6% expect to sell them over the coming year
                                                                                                                                            • Share Dealing Account Ownership and Trading Frequency

                                                                                                                                              • One in six internet users have a share dealing account…
                                                                                                                                                • Figure 33: Ownership of share dealing or spread betting accounts, July 2015
                                                                                                                                              • …of which, 59% trade on a daily, weekly or monthly basis
                                                                                                                                                • Figure 34: Trading frequency, by management of account, July 2015
                                                                                                                                            • Account Access

                                                                                                                                              • Most clients access their accounts online
                                                                                                                                                • Figure 35: Method of accessing share dealing or spread betting account, by management of account, July 2015
                                                                                                                                            • New Account Opening Potential

                                                                                                                                              • Interest in share dealing bodes well for the future
                                                                                                                                                • Figure 36: Interest in opening an account within the coming year, by account ownership, July 2015
                                                                                                                                            • Level of Investible Assets and Investment Product Ownership

                                                                                                                                              • Many share dealing accountholders have a modest level of savings
                                                                                                                                                • A significant proportion of affluent clients are self-managing their account
                                                                                                                                                  • Figure 37: Investment products owned, by total sample and those with a share dealing or spread betting account, July 2015
                                                                                                                                                • Adviser-managed clients are more likely to holds investments in a SIPP
                                                                                                                                                  • Figure 38: Investment products owned, by total sample and those with a share dealing or spread betting account, July 2015
                                                                                                                                              • Investment Attitudes, Behaviour and Goals

                                                                                                                                                • 70% of self-directed investors ‘keep a close eye on’ performance
                                                                                                                                                    • Figure 39: Agreement with statements about investing, by share dealing and spread betting accountholders, July 2015
                                                                                                                                                  • 49% of share dealing accountholders enjoy the thrill of trading…
                                                                                                                                                    • …while 47% are seeking an income
                                                                                                                                                      • Figure 40: Agreement with statements about investing, by all investors, July 2015
                                                                                                                                                  • Expected Future Investment Activity

                                                                                                                                                    • More investors planning to acquire than dispose of assets over the coming year
                                                                                                                                                      • Figure 41: Expected investment activity over the coming year, July 2015
                                                                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                    • Market definitions
                                                                                                                                                      • Data source
                                                                                                                                                        • Consumer research methodology
                                                                                                                                                          • Abbreviations
                                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                                            • Total market forecast – Best- and worst-case scenarios
                                                                                                                                                              • Figure 42: Forecast of total revenues by UK stockbrokers – Best- and worst-case scenarios, at current prices, 2015-20
                                                                                                                                                            • Execution-only stockbrokers
                                                                                                                                                              • Figure 43: Forecast of total revenues by execution-only firms, at current prices – Fan chart, 2010-20
                                                                                                                                                              • Figure 44: Forecast of total revenues by execution-only brokers – Best- and worst-case scenarios, at current prices, 2015-20
                                                                                                                                                            • Full service wealth managers
                                                                                                                                                              • Figure 45: Forecast of total revenues by full service firms, at current prices – Fan chart, 2010-20
                                                                                                                                                              • Figure 46: Forecast of total revenues by full service wealth managers – Best- and worst-case scenarios, at current prices, 2015-20
                                                                                                                                                            • Forecast methodology
                                                                                                                                                              • Fan chart explanation

                                                                                                                                                              Companies Covered

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

                                                                                                                                                              Share Dealing - UK - October 2015

                                                                                                                                                              US $2,672.70 (Excl.Tax)