Sunday 21st July 2024
Broking opportunity grows as new generation embraces online investing
The online investment industry is growing rapidly, and a whole new set of providers are offering investors different ways to invest in different markets with low-cost, innovative fee arrangements.
A ‘new wave’ of younger online investors is pushing online investing well into the mainstream, opening up a greater channel of opportunity for a similarly new batch of online broking providers.
New data from researcher Investment Trends shows a participation rebound in online investing, with 1.28 million Australians now actively trading online in the first half of 2024, up from 1.22 million in the previous 12 months. The surge is mostly driven by younger investors, particularly those in the 18 to 24 year old bracket, otherwise known as ‘zoomers’.
The way people invest, particularly the younger cohort, is changing the broking landscape, with broking platforms that offer smaller incremental trades attracting the next generation of investors according to the data.
“This demographic now constitutes close to one-third of new online investors, significantly impacting market dynamics,” the Investment Trends 2024 Australia First Half Online Investing Report states. “These new participants were often prompted to start investing online by the ability to invest small amounts of money and access investment-related education.”
‘The 18 to 24 age group now makes up 31 per cent of new online investors, behind only millennials on 41 per cent. Zoomers made up 25 per cent of new online investors in the previous period, and 11 per cent in the period before that.
The data highlights a changing of the guard in online broking provision, and a burgeoning opportunity set for new providers that have come onto the scene. While legacy providers attached to the banks, such as CBA’s Commsec and NAB’s Nabtrade, still dominate the mass market, a new batch of providers such as Stake, which offers low-cost fractional trading and access to international markets.
The online broking market has also become more agile, with non-traditional operators opening up new channels for investors. Automated ETF investment management is now possible through providers like Pearler and Stockspot, while Primary Markets has created a viable access point to unlisted company investment with its platform.
Being able to invest smaller amounts, internationally, and into unlisted companies without having to pay outsized fees is attracting more younger people into online investing, Investment Trends reports.
“The rise in international online share investing is a clear indication of investors’ growing appetite for global exposure” said Yiğit Günhan, senior analyst at Investment Trends. “These investors are notably more cost-sensitive, seeking not only lower fees but also transparent pricing and an easy-to-use platform.”
Yet with this development comes a challenge, the researcher adds: continue to innovate or fall behind.
“The report highlights that as the market continues to evolve, online brokers must innovate in product offerings, user experience, and educational initiatives to meet the dynamic needs of the changing online investors. The report underscores a significant opportunity for brokers that can address these evolving demands effectively.”
