Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Online investment dives as novice investors shy away from platforms
Australia’s online investment market continued to decline in the back half of 2023, continuing a trend that saw the quantum of new investors using online services drop to its lowest ebb this decade and burgeoning cohort of investors who no longer trade online.
According to a new report from financial services industry research firm Investment Trends, there were only 71,000 new online investors in the 6-month period from May to November in 2023 – the lowest figure for any such period since before 2020. The result rounds out a bleak year for online investment, with only 76,000 new investors in the six months from November 2022 to May 2023.
In every six month period before that since 2020 there have been at least 100,000 new users in every 6 month period, starting with 265,000 new users in 2020.
According to Investment Trends head of research Irene Guiamatsia (pictured), the drop needs to firstly be put in perspective; the population of investors reached “an all-time high” during and in the immediate aftermath of the pandemic, she told The Inside Adviser.
The subsequent decline, she continued, was sue to a combination of cost-of-living pressures and online investors remaining content to let their portfolios sit dormant.
The pattern of decline in new users has been exacerbated by this continuing high numbers of dormant users, classified as those that have started then stopped trading. The most recent dormancy rate of 19 per cent is only topped by the pervious rate, 28 per cent, which is by far the highest recorded.
There are now 1.22 million active online investors in Australia, down 5 per cent in the last six months.
According to Investment Trends head of research Irene Guiamatsia, around half of online investors classify themselves as either a novice or an “advanced beginner”, with the median time taken to decide on an investment, “irrespective of self-assessed proficiency level”, sitting at one week.
“This insight underscores the pivotal role of education in fostering online investing participation,” Guiamatsia said. “As to how brokers can best support their clients, personalised content (44 per cent), in-depth research on individual companies (43 per cent), and analysis of small and mid-cap companies (38 per cent) emerged as standout priorities.”
