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The Self-Directed Market

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4 August 2010
Alexander Camargo Isabella Fonseca

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."

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