Traditional advice-based stockbroking services are regaining popularity.
As Richard Branson and many others before him have chimed, the best way to make a small fortune is to start with a big one. So it seems is the case with online investing. E*Trade made a serious mark on the public consciousness when their online trading service debuted in the mid 1990’s under the claim that one day we would all invest like this. And for a while everyone did.
But as the world’s stockmarkets hurdled and somersaulted through the past twelve months, investors have gradually crawled back to their brokers asking for advice. Of course, even the major fund managers and investment banks have performed none too well of late. However, they do appreciate the value of running their winners, cutting their losers and never putting all their eggs in one basket.
In the UK, there has been an upsurge in the popularity of traditional stockbroking services and discretionary management and in Europe, the major German brokers are scrambling to open up branches and begin dishing out advice.
So where does this leave the industry? Traditional stockbrokers will never go away entirely and, if anything, the investing boom has simply increased the size of the overall market for their services. Yet for the new generation of online brokers, this is an expensive trend and one they are poorly equipped for. Online brokers are first and foremost technology companies and only in a distant second sense, financial services companies. They now find themselves having to call upon parent companies, strike partnerships with professional advisors and start their own investment banks.
Unfortunately history does not augur well for their recent investments. From Dutch tulips to Lucent options, when the going is good, the man in the street is invincible. If, as prevailing wisdom suggests, the US economy avoids recession and drags the rest of the world into a new digital dawn, so onwards and upwards will the stockmarkets march. Advice will be yesterday’s news. DIY investing is simmering but the flame has not gone out.
