The booming equities markets over the past couple of years have proven to be a significant boost for online stock brokers and derivatives brokers. The UK’s big players have been posting impressive figures. Hargreaves Lansdown, the UK’s biggest online stock broker and investment platform reported record net capital inflows this year and recently added their 1 millionth account holder.
IG Group, the FTSE-250 listed company has also recently reported a 9% rise in its H1 revenue. The company is perhaps best known as a spread betting and CFDs broker. However, over the past few years the company has been focused on moving into tradition stock broking, having launched an execution-only share dealing service in 2014. IG puts its 2017 success down to having reduced advertising spend and other costs while simultaneously improving its client base.
However, both IG and Hargreaves Lansdown have criticised the FCA for what the UK’s online stock brokers appear to universally agree on as overly demanding regulatory demands that do not in fact offer investors additional protection.
However, despite the complaints of regulatory compliance increasing costs for online stock brokers at no tangible benefit for clients, the market appears to be in fine fettle. City stock broker Numis also reported an 18% jump in profits for the year ended September earlier this week.
Retail-facing stockbrokers have benefited from buoyant markets as well as factors such as the government increasing personal allowance levels for ISAs and SIPPs in recent years. Liberalisation of rules limiting access to pension funds has also benefitted them.
One cloud on the horizon, however, may be the rise of ultra-low cost, often app-based, challenger stock brokers entering the market. These tech-focused upstarts are offering clients share trading for tiny or zero charges.
However, though companies such as Hargreaves Lansdown are significantly more expensive, with buying or selling shares costing around £12, this doesn’t seem to be putting off wealthier, middle aged clients. That can be put down to the fact that the average retail investor doesn’t make a large number of share trades and many focus on funds. The trust factor of having sometimes significant portfolio values held by the broker has also clearly meant that higher value clients are being retained in the face of competition from new, cheaper rivals.