Abstract
Overview
Introduction
Stockbroking in the UK has witnessed dramatic changes in the past five years. Record stock market performance followed by dramatic declines has driven radical shifts in investor activity. These turbulent markets have also had important implications on the success of the execution-only business model.
Scope
- UK retail direct equity investment
- data from 2001 to 2005 and forecast to 2010
- competitor assesment including fees and charges, both offline and online
- assesses Contracts for Difference and Spread Betting
Report Highlights
Despite the equity market declines in May 2006, Datamonitor forecasts that the retail equity market will continue to recover to 2010 growing by 7.7% compounded annually.
Jarvis offers by far the most expensive Internet share dealing service in the UK. Its execution-only commission rates are GBP14.00 + 0.3% for both online and telephone transactions. According to the stockbroker's website, the firm works "on an execution-only basis in return for very reasonable management charges and commission rates".
In recent years the market has seen a strong increase in providers offering alternative investments such as CFDs and spread betting. The market is dominated by players that have been active in this area for several years, e.g. CMC Markets, IG Group , Man Group , Cantor Fitzgerald, IFX Group
Reasons to Purchase
- Build your fee structure with the full knowledge of your competitor's fees using our analysis of 36 stockbrokers' commissions and annual fees analysis
- Assess the competition from CFDs and spread betting to clearly identify the key strategic issues
- Access independent forecasts of UK retail direct equity investment to identify product sectors for future investment
Table of Contents
- EXECUTIVE SUMMARY
- Introduction
- Market context
- Fees and charges
- Online stockbroking
- Spread betting and CFDs
- INTRODUCTION
- What is this report about?
- Who is the target reader?
- How to use this report
- CHAPTER 1 MARKET CONTEXT
- Introduction
- Key findings
- The retail direct equity market continues to recover but faces competition
- Investors are saving and investing again but their focus has shifted from equities to other asset classes
- The retail direct equity market has recovered to its 2001 level, but is still almost 30% below its 2000 level
- The total retail balance of rest of world shares and other equity has trebled since 2002
- Retail balances have recovered due to capital appreciation
- Individuals' share of total beneficial ownership of UK equities has slightly declined between 2003 and 2004
- Individual share ownership levels have continued to fall regardless of investors' age, income and sex
- 55-64 year olds are the most likely individuals to maintain equity holdings
- Males are more likely than females to hold shares
- Individual share ownership has fallen almost across all income bands
- Individual investments in direct equity have declined in recent years while investments in ISAs have increased
- Individual direct equity holding plays a continuing role in retirement planning
- The retail equity market will continue to recover to 2010
- CHAPTER 2 FEES AND CHARGES
- Introduction
- Key findings
- Methodology and assumptions
- Flat fees have become more common in the UK in recent years
- Bargain and method comparison
- Small size considerations
- Sharedeal Active and First Direct are the least expensive telephone traders for small bargains
- Hoodless Brennan and The Share Centre are the least expensive Internet stockbrokers for small bargains
- Medium size considerations
- Medium size considerations traded by phone cost up to GBP242.50
- Medium size considerations traded via Internet cost between GBP15.60 and GBP18.85 on average
- Large size considerations
- Trading large size considerations by telephone costs up to GBP417.50
- Large size trades via Internet cost GBP19.30 to GBP21.95 on average
- Annual and other charges
- Most stockbrokers charge clients for transferring stock out of their account
- Several stockbrokers impose additional fees and charges for their services
- Many stockbrokers offer discounted rates for frequent traders
- Fees and commissions: Hypothetical portfolio
- Hoodless Brennan and Fast Direct Share Dealing are the least expensive online stockbrokers in the UK
- Jarvis Signature is the most expensive online stocktrading service in the UK
- First Direct Share Dealing is the least expensive telephone stockbroking service in the UK
- James Brearley offers the most expensive telephone stockbroking service
- Overall, First Direct is the least expensive stockbroker in the UK
- CHAPTER 3 ONLINE STOCKBROKING
- Introduction
- Key findings
- Online stockbroking accounts for the majority of the execution-only market
- The aftermath of the dot.com bubble has seen consolidation in the online stockbroking market
- The advantages of online stockbroking: it is fast, easy and cheap
- Charges for online stockbroking in the UK are still relatively high, compared to the US
- Private Investors are becoming more and more comfortable holding shares electronically
- Direct Market Access is the latest innovation in the online stockbroking market, but is best suited to professional traders
- Execution-only direct equity trading will not be significantly impaired by MiFID
- CHAPTER 4 SPREAD BETTING AND CFDS
- Introduction
- Key findings
- Financial spread betting and Contracts for Difference (CFDs) are carving a chunk out of the retail direct equity market
- Significant advantages over direct equities have made these markets very attractive
- Spread betting attracts no captial gains, income tax and no stamp duty
- Spread betters have the opportunity to go 'short' or 'long' and to trade on margin with low capital requirements
- CFDs give investors exposure to a stock without having to pay the full value and stamp duty
- There are already around 30 providers that offer spread betting and/or CFDs
- CFDs and spread betting attract increased attention from the FSA and will be strongly affected by new European regulation (MiFID)
- The FSA has already fined spread betting firms for offering inadequate promotions to potential clients
- Under MiFID, providers of 'complex' financial instruments have to assess their clients' ability and appropriateness to trade these products
- The emergence of spread betting and CFDs takes market share away from direct equity trading
- Traditional brokers have to extend their product range if they want to stay competitive
- Equity stockbrokers will not be made redundant as investors use different products for different investment strategies
- Spread betting and CFDs are no threat to exchanges as most positions are hedged in the marketplace
- APPENDIX
- Supplementary data
- Definitions
- Research methodology
- Further reading
- Datamonitor Savings & Investments SPP Reports
- Interactive Databases
- Reports
- Briefs
- Life and Pensions SPP
- Interactive Databases
- Reports and Briefs
- Financial Advice Market SPP
- SPP writing team
- List of Tables
- Table 1: Breakdown of UK retail equity balances by category, 2001-2005
- Table 2: Annual fees charged by stockbrokers, May 2006
- Table 3: Fees for transfers in and out, May 2006
- Table 4: Other fees and charges, May 2006
- Table 5: Hypothetical portfolio: Ranking of Stockbrokers based on charges and fees for online transactions
- Table 6: Hypothetical portfolio: Ranking of Stockbrokers based on charges and fees for telephone transactions
- Table 7: Banks involved in online share dealing in the UK
- Table 8: Example: spread betting on Company XYZ, long and short bets
- Table 9: List of providers that offer CFD trading and/or Spread Betting
- Table 10: Total value of UK retail savings and investments market by broad product line, 2001-2005
- Table 11: Total retail equity balances by share type, retail equity balance change due to capital appreciation and retail net inflows 2001-2005
- Table 12: Beneficial ownership of UK shares by ownership category, as a proportion of total shares, 2000-2004
- Table 13: Proportion of households in each region with stocks and shares / member of a share club, 2003-2005
- Table 14: Proportion of UK adults in each age band with shares
- Table 15: Proportion of male and female adults holding shares 2003-2005
- Table 16: Proportion of households holding shares by weekly income bands 2003-2005
- Table 17: Have you added to your investment in any of these in the last 12 months?
- Table 18: Please can you tell me, of these products that you have are you contributing, or have you been contributing, to any of them actually as part of your retirement planning?
- Table 19: In the next six months, which, if any, of these do you intend to do?
- Table 20: Share of total execution-only transactions by trading method
- Table 21: Comparison of charges for telephone and Internet trades, GBP
- Table 22: Execution-only trades by channel
- Table 23: Retail equity market forecast until 2010
- List of Figures
- Figure 1: The share of retail assets held in direct equity has remained constant at around 25% since 2002.
- Figure 2: Investors have regained confidence in quoted UK stocks in the last four years, 2001-2005
- Figure 3: Capital appreciation increased strongly in 2005 while retail net inflows declined, 2001-2005
- Figure 4: The FTSE 100 recovery since 2003 has resulted in increased capital appreciation, 2001-2005
- Figure 5: Total individual beneficial ownership of shares has slightly declined between 2003-2004
- Figure 6: The level of direct equity ownership among UK households remains heavily slanted towards the South East
- Figure 7: The age range of 55-64 year old people in the UK has the highest proportion of individuals holding equity
- Figure 8: 4% more UK males, on average, hold shares than women, 2004-2005
- Figure 9: Share ownership has fallen almost across all income bands
- Figure 10: Individual investments in direct equity have declined in recent years while investments in ISA have increased
- Figure 11: Direct equity holding plays a continuing role in retirement planning
- Figure 12: It is expected that the retail equity market will continue to recover to 2010
- Figure 13: Stockbrokers offering flat fee structures as of May 2006
- Figure 14: The higher the bargain, the higher the costs for trading
- Figure 15: Sharedeal Active and First Direct are the least expensive telephone stockbrokers for small bargains while James Brearley and Eden Financial are among the most expensive
- Figure 16: Hoodless Brennan and The Share Centre are the least expensive Internet stockbrokers for small bargains while Capita Sharedealing is the most expensive
- Figure 17: Sharedeal Active and First Direct are the least expensive telephone stockbrokers for medium size bargains while James Brearley is the most expensive
- Figure 18: Hoodless Brennan and The Share Centre are the least expensive Internet stockbrokers for medium size bargains while Jarvis is the most expensive
- Figure 19: Large size trades via phone cost Ｐ�0-Ｐ�20 on average
- Figure 20: Large size trades via Internet cost Ｐ�4-Ｐ�9 on average
- Figure 21: Hypothetical portfolio: comparison of stockbrokers that offer Internet and telephone trading
- Figure 22: In 2005 Internet share dealing has overtaken traditional trading methods
- Figure 23: CREST Membership provides for full shareholder rights
- Figure 24: CFDs are an ideal trading vehicle for short-term investments
