It's now clear that the biggest winners coming out of the financial crisis are online brokers, where the fees are cheap and the advice is non-existent.
Other investment businesses think in terms of recovering from the damage of the past year. For online brokers, the question of the moment is how to hang on to the thousands of investors who have opened accounts with them since the stock markets tanked last fall.
This matter is complicated by the fact that these new customers aren't strictly hotshot stock traders who want quick, slick access to the markets, above all. Mainstream investors are also migrating to online investing, or at least the idea of cutting some or all ties with an adviser and going it alone.
Successful online investing requires that you have the knowledge, interest and time to look after your own accounts. More than that, you need confidence.
Successful online investing requires that you have the knowledge, interest and time to look after your own accounts. More than that, you need confidence. Otherwise, the money you transfer into an online brokerage account is liable to sit there doing nothing. That's no good for you, and it's no good for your brokerage firm, which expects you to buy stuff and thereby generate commission revenue.
Keeping mainstream clients happy and productive starts with an easy-to-use website. That's the view they've taken at Disnat, the online brokerage arm of the huge Quebec-based Desjardins credit union, and it's paying off to the extent that the firm recently topped its competitors in a customer satisfaction ranking done by J.D. Power & Associates.
Disnat vice-president Frederic Paquette said the firm did well in areas such as website appearance and ease of use, as well as the helpfulness of its investing tools. In a word, it's all about making clients feel comfortable.
“People are using the Web for everything now – for booking a trip, for doing their banking,” Mr. Paquette said yesterday. “Online brokerages are an extension of this.”
New account openings at Disnat were up 100 per cent for the first seven months of this year compared with the same period last year, in part because of the Jan. 1 introduction of the tax-free savings account. Trading volumes jumped 30 per cent, with more of the growth coming from the Disnat Classic service for mainstream investors than the DisnatDirect service for active traders.
Disnat will run about 250 online seminars this year on various investing topics, but its most innovative move is to create an online newsletter called DisnatGPS.
Online brokers are prohibited from providing advice, but they can teach clients the basics and offer guidance.
Disnat will run about 250 online seminars this year on various investing topics, but its most innovative move is to create an online newsletter called DisnatGPS. Subscribers get access to various model portfolios, and to continuing updates when stocks are bought or sold. The portfolios are managed by Steve Deschesnes, a strategist with Desjardins Securities.
How do investors choose an online broker? My sense after following this sector for many years is that people gravitate to brokers that are part of the same corporate family as the bank they frequent.
There are conveniences to having a bank and broker in the same family, the main one being that you can quickly and easily shuttle money back and forth. But a broker has to deliver, too. One way of doing that is to demystify the online investing process for new and prospective clients.
That's the idea behind the risk-free online practice accounts introduced late last month by RBC Direct Investing, which is part of Royal Bank of Canada.
