Online Trading
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Of Note:


The days when the typical online investor was a tech-savvy white male are long gone.

Trading is down, yet the total value of assets in online accounts is up.

The average age of people trading online has dropped, more women are joining the move toward direct investing
and new Canadians, especially ethnic Chinese, are making their presence felt in a major way.

In addition, new products such as tax-free savings accounts are credited with driving continued expansion.


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Not a white male domain


Canada's online brokerage industry appears to be reinventing itself. The frantic pace of growth in 2008 and 2009 has slowed to single-digit levels. Trading is down, yet the total value of assets in online accounts is up, according to industry experts.

Today's online investors aren't restricting themselves to equities and mutual funds. Options are playing a larger role in portfolios --even gold bullion.

The average age of people trading online has dropped, more women are joining the move toward direct investing and new Canadians, especially ethnic Chinese, are making their presence felt in a major way.

In addition, new products such as tax-free savings accounts are credited with driving continued expansion.

"I think what we are seeing is a maturing of the industry," says Jason Storsley, president of RBC Direct Investing. "The days when the typical online investor was a tech-savvy white male are long gone. Now there is no average investor. They cover all age, sex, ethnic and economic demographics.

"What they share is a desire to play a greater role in managing their own investments."

The push that propelled online investing from a niche market into the mainstream was the recent recession, experts say. As men and women young and old watched their hard-won investments drop in value in the market slump, they began to take control of their portfolios into their own hands.

The rush was on.

"2008 was a record year and then 2009 beat that," says Tony Ierullo, senior manager strategic development at TD Waterhouse Discount Brokerage, Canada's biggest online investing brokerage.

This year, however, as markets returned to more normal conditions, trading volumes are down, the investment outlook is less volatile and many of those who rushed to do their own buying and selling are either taking a longer-term approach to investing or returning control of portfolios to professional advisors, industry professionals say. But investors still on the whole want to keep a hand in the game.

The upshot is that more than one in three adult Canadians now either have an online trading account or are considering doing so, says a recent BMO Financial Group survey.

Who are they? JD Power and Associates gives an idea in an end of June report. It says the average age of discount brokerage clients is now 45 -- compared with 50 in 2009 --and 40% of clients are now in the 18-to-39 age range, compared with just 26% last year.

Women are increasingly becoming online investors, adds Cesar Rainusso, vice-president strategy, product development, at BMO InvestorLine.

"The number of women who have accounts with us has grown 113% over the past five years," he says.

The trend is also evident at TD Waterhouse, where an Ipsos Reid poll showed that last year women accounted for 35% of people trading online, up from 31% in 2007, says Mr. Ierullo. Nor is it only women who are flocking to online brokerages.

"One of our largest areas of growth has been among new Canadians," Mr. Ierullo says. "About three out of five new customers are immigrants from Asia, mainly China. The Chinese are culturally entrepreneurial, so it stands to reason they would become online traders. In fact we now offer service in both Cantonese and Mandarin."

While growth in the number of clients may have slowed, the value of portfolios held by online traders is growing, says Investor Economics. The most recent figures show a year-over-year growth in assets under administration for the entire online brokerage industry of 42%.

Edward Kholodenko, president of Questrade Inc., the largest independent non-bank discount brokerage, says that situation is reflected in what is happening with his company.

"While the boom in new business of the past two years has slowed, there has been an appreciable growth in the size of accounts held with us," he says.



Financial Post


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