Online investors reducing reliance on advisers

Recent statistics confirm what many Canadian investors, brokers and financial institutions have known for some time — that more and more people are going online to self-manage their investments.

Recent statistics confirm what many Canadian investors, brokers and financial institutions have known for some time — that more and more people are going online to self-manage their investments.

A recent study by Investor Economics shows that the online brokerage industry in Canada is continuing to grow at a very impressive rate.

In the second quarter of 2009, online trading volume increased 43 per cent over the first quarter of 2008, and in the first half of the year, volume increased a whopping 133 per cent over the first six months of 2008.

The total number of trades in the second quarter of 2009 hit 12.8 million, a quarterly high.

Similar activity was recorded in the area of new account openings, which rose 77 per cent in the second quarter of 2009 over 2008, and 201 per cent in the first half of 2009 over the corresponding period in 2008.

At the end of the second quarter of 2009, there were four million online accounts in the country.

Investor Economics identified 18 online brokerage firms across Canada with $174 billion of assets, 92 per cent of which were held at the big six Canadian banks (Royal Bank, Canadian Imperial Bank of Commerce, Bank of Montreal, TD Canada Trust, Scotia Bank and National Bank of Canada.)

This compares to 70 full-service brokerage firms with $631 billion in assets, 77 per cent of which are administered by the big six banks.

“The growth of online brokerage in Canada certainly has picked up recently, and what we’ve heard from industry participants is that online investing has benefitted from a number of factors (such as) increased control and flexibility of one’s portfolio and lower costs,” said Investor Economics analyst Jeff Wojcicki.

“What we’ve noticed with both the online and advice-giving channels is that investors are not forgoing their advisers entirely, but are keeping a small portion of their assets to manage under their own discretion and embracing online investing to a greater degree than before,” Wojcicki said.

Another reason for the continuing flight of investors to online brokerages are the many tools available that now give self-directed investors access to the information they need to make informed investment decisions.

The online brokerage industry has evolved over the last 10 years from merely facilitating trades at a discount. Today, investors have access to a wide variety of resources and tools that provide the analysis and information they need to determine their asset allocation mix based on their risk profile and investment time-line, and make appropriate investing decisions and trades.

Recently, RBC Direct Investing launched a unique program that lets Canadian investors open practice accounts and buy and sell a variety of investments with $100,000 of no-risk, practice money.

The accounts are integrated into the RBC Direct Investing online site, have access to all the tools and resources available to real online investors, and can be opened in a couple of minutes.

While online investing is growing rapidly in Canada, it still lags behind levels in the United States.

“In general, Canadians have been more cautious in adopting online investing compared to the U.S,” said Wojcicki. “We have some catching up to do.”

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors. He can be contacted at boggsyourmoney@rogers.com.