Self-directed brokerage market evolves as online brokers gain

Self-directed brokerage market evolves as online brokers gain

Despite unpredictable and challenging economic conditions over the past several years, the self-directed market shows major growth as online brokers have come to dominate the retail investor market as well as others. Much of this growth is due to an increasing number of active traders. Today’s traders have direct access to the market, and access to products and instruments and services that investors couldn't have dreamed of getting just 10 years ago.

Brokers certainly have raised their game. But as regular followers of the contest know, most go through hot and cold streaks, so investors should look for durable, long-term out-performance. Online brokers have been gaining in popularity as it has become more common to bank, trade and invest online. New industry rules for 2014 have inadvertently encouraged more people to invest on their own, since they may not like the idea of making upfront payments for financial advice. The self-directed brokerage market continues to evolve as investors increasingly opt for greater control over their investments.

As banks focus on integrating channels and capturing more of their existing clients’ assets, online brokerage has become more attractive. Today’s investors want an online broker that will meet their investment needs. It is clear that too many people spend their time wondering what investments to buy, when they really should be considering how they’re going to manage their investments. Having a suitable investment account is by far the most important thing. If you do not have the administration system and logistics worked out, you can’t manage your portfolio.

Online brokers allow investors to set up accounts, deposit money into their accounts and then buy and sell, funds and other securities within these accounts. Selecting the right online broker can mean a dramatic difference in how effective one’s investment strategy ultimately proves to be, and one should always be careful to closely consider all of the various options available.

“What online brokerages can do to differentiate in the marketplace is massive,” says George Grech, head of the trading, at award winning EXANTE a leader in prime brokerage worldwide. As the online prime brokerage business has evolved, it is not entirely clear who is/was the plover bird and who is/was the crocodile.

Perhaps it is fair to say that the roles and relative balance of power between the parties changed and will continue to change. As both the prime brokerage industry and the hedge fund industry grew over the last decade, so did their dependence on one another. Smaller, newly formed hedge funds sought out the services of well-established and respected prime brokers and found that, vis-à-vis their hedge fund investors, there was a validating effect to working with a large prime broker.


Patrick J O Brien Communications director, Exante

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