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Retail brokerage continues to attract new traders (six percent of market)
Interest in contracts for differences (CFDs) being driven by access to greater leverage and the potential to profit in falling markets
12 September 2007
Australia
Australia’s high performing equities market continues to attract new share traders -- with those who commenced trading shares in the last six months representing an estimated six percent of the market, reveals a report released today by The Nielsen Company.
Nielsen’s bi-annual Retail Brokerage Report* also showed a continued appetite for share trading, with 15 percent of those who have never traded or are lapsed traders citing an intention to be active in the coming 12 months.
“The seemingly endless boom in the Australian equities market has acted as a magnet in attracting new clients to share trading,” cites Glenn Wealands, Director, Financial Services, The Nielsen Company. “However, the threat of a downturn in markets means that brokerage firms need to maintain their relevance by keeping their clients engaged and aware of future trading opportunities.”
This may in part explain customer interest in CFDs – which is now traded by about four percent of brokerage clients. Over half (52%) of those trading CFDs cite “making profits in a falling market” as a reason for trading, second only to “leverage or the potential to take a larger position at a fraction of the cost to standard share trading” (at 64% - Refer Chart 1).
The report shows increasing consolidation in the market with the four major brokers (CommSec, E*Trade, Westpac Broking and National Online Trading) collectively being the main broker for almost two-thirds of online traders. In the past six months, CommSec and E*Trade have both celebrated the strongest share growth – each capturing around one in five new accounts.
“The firms that have been most successful in acquiring new accounts recognise the importance of leveraging a respected brand, and moreover been able to demonstrate ease of website use, good quality market information and research, and delivering good value for money,” notes Wealands.
In terms of customer satisfaction, investors had little to complain about with only seven percent of all customers citing dissatisfaction with their broker. “This does not mean that broking service providers can rest based on their laurels,” states Wealands. “The power of recommendation, to many, is a really important part of the investment decision process”.
Just under half (44%) of all those with varied investments (not just broking), cited recommendations from family and friends as a source of investment information - critical for the growth of broking when you consider that a large majority (84%) of those who rated their broker as excellent were highly likely to recommend that broker; versus only a minor eight percent of those who rated their broker as average or below average.
“Retail Brokers need to be aware, now more than ever, how important a factor customer satisfaction is – especially when it comes to obtaining new clients,” stresses Wealands.
Chart 1 What are the reasons for you to trade CFDs?
*About The Retail Brokerage Report
The Nielsen Company’s bi-annual Retail Brokerage Report is based on responses from 2200 Australian consumers with retail broking accounts, provides insights on retail broker market share, service strengths and weaknesses and market dynamics such as trends, trading frequency, source of investment information and use of asset classes.
About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions and recognised brands in marketing information (ACNielsen), media information (Nielsen Media Research), business publications (Billboard, The Hollywood Reporter, Adweek), trade shows and the newspaper sector (Scarborough Research). The privately held company has more than 42,000 employees and is active in more than 100 countries, with headquarters in Haarlem, the Netherlands, and New York, USA. For more information, please visit, www.nielsen.com.
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