March Madness is here. Whether that means trying to entertain kids who are off school, figuring out brackets and odds, or making sense of any given news day, keeping up with all of what’s going on and still having time to invest is no easy feat. For those in the online brokerage space – as well as those in the robo-advisor space, finding products and services that fit into the busy realities of everyday investors is key to keeping clients happy.
In this edition of the roundup, we take a look at some interesting stats about online investors and how the wealth management space is evolving to respond to the realities of today’s investor. Next, we put the spotlight on a quiet trend that has emerged around online investor education at several bank-owned brokerages. As usual we’ll also take a look at the DIY investor conversation online on Twitter as well as in the investor forums.
And the Survey Says….
Every so often, one of the major online brokerages or financial institutions in Canada takes the pulse of the investor segment to gauge perceptions about investing topics. Earlier this week, BMO’s SmartFolio published some of the results of a study it commissioned in November of 2017 which asked adult Canadians how they felt about investing online.
The survey results painted an interesting portrait of the overall perception of investing online in 2018 and how those attitudes and perceptions varied according to the age cohort the respondents belonged to, namely: Baby Boomer, Generation Xer and Millennials.
One interesting set of data points revealed that nearly half (46%) of those surveyed felt intimidated by having to make investment decisions, almost two thirds stated they need to learn more about investing (60%) and just over one third (38%) don’t feel they have enough time to invest. Certainly, this combination of perceptions underscores the importance of the decisions that people make with their investment capital, as well as the associated anxiety and hesitation that accompany putting money into harm’s way in order to earn a return. In other words, many Canadians believe investing is hard and it matters if you don’t get it right.
Aside from the ‘investor belief’ insights that the survey uncovered, there were two additional stats that provide insights into product experience and what online investors are seeking out.
First, when measuring the satisfaction of the investment choices made by digital advisors, there was a notable gap between what Baby Boomers felt satisfied with compared to Millennials or Gen X’ers.
According to the survey, only 33% of Baby Boomers felt satisfied with the recommendations that were made by a digital advisor compared to 79% of Millennials and 76% of Gen X’ers who felt satisfied. The natural question that arises is why that would be the case? What is it about the investment choices that were made for Baby Boomers that just don’t resonate with the majority of those investors?
Another interesting statistic revealed by this survey was the extent to which different demographic groups are seeking out tools to help them “invest smarter.”
According to the survey, 38% of Baby Boomers are seeking out tools to help them “invest smarter” while 58% of Gen X’ers are looking for those tools and 67% of Millennials are seeking out these tools. The survey highlights an inverse relationship between age and the desire to seek out tools to ‘invest smarter’ which is a curious finding. Part of the answer may lie in what exactly constitutes being able to “invest smarter.”
Interpreted one way, it could imply that individuals are looking for above market returns. Considering that trading/investing can be a zero-sum game, it doesn’t seem likely that everyone will achieve market beating-performance. Based on the inverse relationship with age shown in the desire to invest smarter, perhaps older individuals have enough experience in the markets or have different expectations of how investing can/does work such that they know ‘tools’ are likely going to provide modest returns.
Another point of view might be that the individuals may always be on the lookout for tools to improve the investing experience and that might improve the performance of their portfolio. Again, the age factor is interesting because it might imply that older individuals are either less motivated to find those tools or they believe they already have such tools and therefore don’t need to seek them out.
As the digital advice/robo advisor landscape continues to evolve, it will be interesting to watch how services like BMO SmartFolio translate the insights gained from these surveys and turn them into features and services for online investors.
An interesting interview this week on BNN also highlights how the digital advice space is maturing.
Specifically, it appears that digital advice or robo-advisor portfolios can be used not only by consumers themselves but in a hybrid fashion by advisors who work with clients to provide advice but who also utilize the robo platform to help automate the operational side of managing clients and delivering consistent service to multiple clients.
The big picture on the survey results point to perennial issues when it comes to investing, generally that DIY or online investors could use more confidence, experience and perhaps time when evaluating investment opportunities. While many investors may opt to go the DIY route to learn about investing, there’s clearly a need for individuals who help others navigate investment decisions.
Despite the presence of DIY services, the challenge for robo-advisors and wealth managers in general, it seems, is to provide consumers with the confidence that by spending their money in the form of fees, they are actually going to receive the benefit of confident, competent and convenient service – and that a particular provider is better than a very long list of competitors.
Investor education: The quiet evolution
Investor education from Canada’s online brokerages has certainly changed over the past four years. Gone is the rush to hold multi-city seminars and trumpet investor educational resources as a cornerstone of the online brokerage offering. Instead, in 2018, many online brokerages have either pared back their investor education offering or moved to an ‘on demand’ model that uses webinars or video content. Moreover, what used to be free and widely available has shifted behind the login screen to be a ‘client perk’ rather than a marketing hook.
While this has happened industry wide, it has been most prominent at the bank-owned online brokerages over the past few months where we’ve noted some quiet upgrades to the investor education sections.
One of the most recent we noted was from Scotia iTRADE which reorganized its educational content and offers an easier to navigate experience for content based on what activity investors are interested in learning about. Scotia iTRADE’s YouTube channel also has an easy to access archive of educational content, including webinars on topics related to trading and investing.
Another bank-owned online brokerage that has quietly been enhancing its educational content has been CIBC Investor’s Edge.
Their “knowledge bank” is a mixture of webinar topics as well as insights on economic outlooks, as well as tax and financial planning. In fact, coming up next week is a session on tax tips featuring Jamie Golombek that DIY investors may want to tune into.
Perhaps the most elaborate example of the shift in deliver of investor education content is from TD Direct Investing. Although they do continue to offer webinars and the occasional seminar, the big focus for DIY investor topics is the MoneyTalk Investing site by TD which has an extensive selection of personal finance information, including investing, videos and content for investors to consume on a regular basis.
With tax season now upon us, it will be interesting to see if any additional helpful video/webinar content starts to filter out to DIY investors.
Seasonal content aside, there has been a noticeable pullback in the amount of ‘investor education’ being provided by Canadian discount brokerages and there is a clear divide between online brokerages who are providing investor education content to audiences for free (perhaps as part of a marketing strategy) and those that are restricting that content to existing clients only.
Discount Brokerage Tweets of the Week
From the Forums
Transfers Gone Wild
Every so often something comes along that is a genuine surprise. This post, from the Canadian Investor thread on reddit, is a fascinating story about how one online brokerage client ended up with $600K (in cash and securities) that was accidentally transferred into their account and the chain of events that happened next. Definitely worth a read when considering switching brokerages.
Cross Border Math
Keeping track of costs and transactions is important when investing online. In this post, one user executed a limit order but found the price they ended up paying was higher than what they had set. Fortunately, some helpful forum users helped break down the math that showed how buying across currencies requires some extra math to ensure everything adds up.
Into the Close
That does it for another week. Next week should be another wild week as interest rates in the US are set to creep higher and, of course, there will be no shortage of funny business in the oval office. Fortunately, even if your portfolio didn’t end the week in the green you can still celebrate St. Patrick’s Day and continue the hunt for that elusive pot of gold next week! Best of luck with your brackets and little leprechauns! Have a great weekend!