Retail Investor Trading in North America

Perspectives on Trading Preferences, Behaviors, and Technology Adoption
by Isabella Fonseca,  Dushyant Sahgal, May 1, 2012
North America

Abstract

In today’s dynamic market landscape, online brokerages continue to operate under challenging conditions. Intensive competition and thin commissions have increased pressure to continue to up the ante and meet client expectations. In this environment, it is imperative for online brokerages to possess a deep understanding of their customers’ behavior, needs, and preferences.

Beginning in February 2012, Celent conducted a survey of retail investors across the United States and Canada to gauge their trading styles, product preferences, and levels of satisfaction. The landscape of retail investors participating in the survey cut across all demographics: age, gender, and affluence level. The analysis of 220 completed responses and synthesis of the data collected enabled Celent to draw major trends and developments in the online retail brokerage industry in North America in a new report, Retail Investor Trading in North America: Perspectives on Trading Preferences, Behaviors and Technology Adoption.

”Retail investors are an extremely diverse group with varying affluence levels, skills, and trading preferences,” says Isabella Fonseca, Research Director at Celent and coauthor of the report. “This report will provide firms with an understanding of the retail investor landscape in the US and Canada and the latest trading and technology preferences. In addition, it will give firms ideas on potential products and services to be offered to retail investors”

“At a fundamental level, the fortunes of online trading platforms are tied to the trading activity of retail investors,” says Dushyant Sahgal, Analyst at Celent and coauthor of the report. “Apart from offering well-rounded product portfolios and new features, trading platforms must also operate an effective knowledge dissemination portal to ensure that willing customers learn about various asset classes and debunk myths surrounding them.”

This report begins with a definition of retail investors, outlining qualifying criteria and presenting an overview of the questions comprised in the survey. The report then provides details on the demographics and trading behavior of participants followed by an extensive presentation of retail investors’ online trading platforms use, addressing a plethora of aspects related to trading such as services offered, fee structures and levels of customer satisfaction. Celent then presents a detailed analysis of the survey data collected and analyzes the relationships between retail investor behavior as well as demographics and trading preferences, among others. The report concludes with considerations about where the online retail brokerage industry is headed and how firms can unlock pockets of value to grow their book of business.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Survey Overview

5

 

Qualifying Criteria

5

 

Survey Questions

6

Survey Participants

7

 

Demographics

7

 

Experience with Trading

9

Trading Behavior of Retail Investors

12

 

Trading Frequency

12

 

Product Preferences

13

 

Trading Styles and Decision-Making

18

Online Trading Platforms

23

 

User Preferences

23

 

Platforms

25

 

Online Trading Firms’ System Capabilities

28

 

Mobility

31

 

Fee Structure

33

 

Customer Satisfaction

34

Analysis of Results

37

 

Demographics

37

 

Products and Trading Preferences

38

 

Trading Behavior

40

 

Mobility

43

 

Customer Satisfaction

44

Conclusions

47

Leveraging Celent’s Expertise

49

 

Support for Financial Institutions

49

 

Support for Vendors

49

Related Celent Research

50

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