The Self-Directed Market

by Alexander Camargo,  Isabella Fonseca, August 4, 2010
Product Trends/ Reviews
North America

Abstract

Active investors and active traders present a significant opportunity. By 2012, these segments are expected to account for over 40% of the US investor market.

In a new report, The Self-Directed Market, Celent compares online brokerage firms’ technology developments and retail investor preferences and provides a breakdown of the various customer investor groups with details on investment objectives and trading strategies. The report compares trading technology developments and latest enhancements to attract the active investor category.

The report is based on a two-month study on the US online brokerage industry. It identifies different customer segments within the self-directed market and explores how online brokerages target these customer segments and differentiate their offerings. Particular emphasis is placed on each firm’s active investor strategy.

Main findings of the study include:

  • More and more investors are moving toward the self-directed model.
  • Technology drives active trader market growth. Online trading platforms and associated tools are key for active investor involvement.
  • To differentiate themselves and capture a greater share of the investor’s wallet, online brokerages have greatly enhanced their trading functionalities, usability, and analysis tools. Some firms also offer banking and investment solutions.
  • Firms are turning to social networking and educational tools. Mobile trading applications are also in development across brokerage firms.
  • Market volatility has led to greater demand for a more diverse set of products. Interest in options, futures, and foreign exchange continues to grow among retail investors.

"Despite market conditions, the self-directed market showed signs of moderate growth of 3% in the past year," says Isabella Fonseca, Research Director at Celent and coauthor of the report. "For the active investor segment, the investment experience has become less about the speed and cost of the transaction and more about the quality of service, access to robust functionality, and the overall convenience to proactively manage their investments, at any time and from any place."

"During the past year, firms have been adding a number of technology enhancements to be the online brokerage provider of choice," says Alexander Camargo, Celent Anaylst and coauthor of the report. "Those firms that are willing to invest and adapt to client demands will be future industry winners."

 

 

 

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

Research Methodology

5

The Online Brokerage Industry

7

 

Development and Trends

7

 

Client Segmentation and Characteristics

12

 

Product Trends and Preferences

14

The Active Investor Market – An Attractive Segment

21

 

Sizing the Active Investor Market

24

Recent Developments in Online Brokerage Technology

26

 

Trading Functionality for the Active Investor

33

 

Innovation Functionalities

36

 

Retirement Services

39

Social Networking and Client Education

42

 

Social Networking

42

 

Education Tools

46

 

Options Education

50

Trading Platforms – Vendor Solutions

51

 

Scivantage

55

 

Broadridge

56

 

SunGard

57

Looking Forward

60

Leveraging Celent’s Expertise

62

 

Support for Financial Institutions

62

 

Support for Vendors

62

Related Celent Research

63

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