(Photo: Martin Flanders)
Over the past two years, the popularity of stand-alone investing has grown exponentially, thanks to attractive platforms, time and money investors, and the steroid technology industry. But with the recent downturn in stock markets and definancing coming to an end, enthusiasm seems to be running out.
Jean-Sebastian Ranger, 34, knew nothing about stock markets or self-investment when he opened an account on the Questrade platform in April 2020. The construction mechanic made $ 15,000 for the first time, hoping to win his friends. to him.
During the year, he tripled his stake amid a sharp rise in several stocks, but has since stopped using his account. “I realized that you can double what you invest or lose everything,” he said. I was opportunistic, but I wouldn’t plan my retirement with that. “
Julien Leme did not close the Wealthsimple Trade account he created in January 2021, when Gamestop (GME, $ 91.80), AMC (AMC, $ 11.71) and BlackBerry (BB, 7.31) USD) soared thanks to the association of the investor community on Reddit. His initial investment of $ 2,000 doubled in value six months before returning to the starting point. He checked his phone two or three times an hour to monitor his account. Now he turns to him at most once a day.
“I realized that investing takes a lot of knowledge and that people get paid for it,” said the 30-year-old, who was also new to the world of independent investing.
Such a sudden drop in interest can also be seen in some Canadian financial institutions that offer online brokerage services. While self-investment will remain attractive over the next few years, roller coasters over the past few months are sure to remind new traders of the importance of keeping both feet on the ground.
For the online brokerage industry, there was “the world before the pandemic and the world after the pandemic,” said Mark Girard, vice president and general manager of Desjardins Online Brokerage.
Desjardins, like its competitors, does not disclose the exact number of new customers or the volume of transactions recorded on its online brokerage platform Disnat. However, he reports a 114% increase in the number of new users compared to the average for the first quarters of the five years before the pandemic and the first quarter of 2022, and confirms that the volume of transactions is generally proportional to the number of new customers.
For Marc Girard, this is almost unheard of for over 30 years at Desjardins Online Brokerage. “The only such event was the technology bubble of the 2000s, where growth was 100% for opening accounts and transactions. That’s why this is an exceptional moment in 20 years. “
In general, enthusiasm for online brokerage platforms varies depending on the season – less activity in summer than in autumn or winter – and is especially evident when emergencies cause market volatility. This was the case in Desjardins for months before the legalization of cannabis in 2018, but demand was even stronger at the beginning of the pandemic, in March and April 2020, then in January and February 2021, with the advent of the Reddit Phenomenon.
January 2022 marked a kind of “return to normal” for Disnat, although the level of customers and transactions remains higher than before the pandemic.
The same applies to the InvestorLine Bank of Montreal (BMO) platform, which has seen a slowdown in demand: the opening of new accounts has halved, and trading activity has fallen by a third between January 2021 and January 2022. However, the platform welcomed 48% more new customers in January 2022 than in January 2019.
“Since last January, the situation has returned to normal,” said Sabrina Della Fazia, national head of digital sales and investment at BMO InvestorLine. The heat we have known for the last two years has begun to subside.
Two other very popular online brokerage platforms, Wealthsimple Trade and Questrade, have also been captured by novice investors. The first speaks of “incredible growth” during the pandemic, but without disclosing the exact figures, and the second reports a sharp increase in the number of customers (+ 140%) and the number of transactions (+ 300%) between 2019 and 2021. However, Questrade refuses to disclose more recent data.
Less costs, more customers
The National Bank’s subsidiary online brokerage, Banque Nationale Courtage direct (BNCD), has also gained new clients, in part due to the abolition of brokerage fees announced in August 2021. Disnat followed suit for three weeks later.
It is difficult to see whether the abolition of the fee is the argument that persuaded new users to register, says Claude-Frederick Robert, president of the BNCD, but it seems to have been important. In the period from September 2021 to March 2022, the number of new customers of the platform increased by 65% compared to the same period last year.
At Desjardins, the effect of abolishing brokerage commissions was felt in September and October 2021, when the number of new clients increased by 38% in the summer of 2022 compared to the same period twelve months earlier, but since then the curve has returned to normal. tempo.
BMO uses a different strategy. He continues to charge a brokerage commission, but tries to stand out by offering personalized advice to guide an independent investor. This allows the ConseilDirect service, whose accounts have tripled from January 2019 to January 2022.
“This means that more and more people are looking for advice, perhaps because it is not easy to navigate the markets,” says Sabrina Della Fazia. Fees for brokerage services or not, but the trend in the three surveyed financial institutions is the same: young investors are increasingly trying to go out on their own.
On the Disnat platform, with Desjardins, a quarter of users are between 18 and 30 years old, a share that has grown especially during the first half of 2021. In the BNCD, the average age has risen from 53 to 44 since the end of brokerage commissions, while half of the accounts opened these days on BMO InvestorLine account for investors aged 18 to 35.
thirst for education
The sudden attraction of young investors to the stock markets has had another direct consequence in recent years. The demand for learning or information about this complex universe is felt like never before.
While more than 25,000 people took part in webinars and other educational events organized by Desjardins in 2021, which is 58% more than in 2020, many of them also turned to learning of all kinds that appeared in Online. The Financial Markets Authority (AMF) warns that rates that in some cases promise attractive results, but which we should beware of.
We found that several so-called “experts”. trade“Offer expensive training, often online, the quality and rigor of which are in no way guaranteed,” said AMF spokesman Sylvain Teberge, noting that autonomous investment training is not recognized or controlled by the organization.
Over the past 12 months, AMF has also received more than 30 consumer calls for private lessons in autonomous investing related to securities, currencies or cryptocurrencies.
During the same period, it also registered about 50 complaints of allegations of inflation and dismissal (p.ump and dump ) or other forms of market manipulation. Scammers use this trick to deceive investors: they buy a security before trying to increase its value by spreading false positive news about the company.
Deceived investors buy stocks thinking they are getting a lucrative deal that increases the value of the stocks. Those responsible for the scheme then sell their shares: then they make a profit, and other investors receive a share that costs almost nothing.
In particular, to increase the financial literacy of Quebecers who may fall into this trap, Yousef Gellash launched financial education tools five years ago and then created a Facebook page about three years ago specifically dedicated to fiÉté 2022 Personal nance (L’argent never sleeps ). ago. This professor of administration at Montmorency College, who previously worked in the banking sector as a financial adviser, has directly seen the atmospheric thirst for education since March 2020.
“There were a lot of questions on the Facebook page about brokerage platforms, exchange-traded funds (ETFs), how to buy stocks, what training to go through,” he recalls. I also noticed that many people rushed to invest independently, not finding time for proper education.
Return of the pendulum?
So what will the next few months consist of? The next years? Will self-investment remain attractive, or will it fall at the same rate as stock markets since the beginning of the year?
Most Canadian online brokerage players are optimistic. Mark Girard of Desjardins, for example, is based on a study by Investor Economics, which predicts that the sector will grow by 7.4% per year until 2030. The National Bank hopes that its mobile application will direct mediation, which should be available to the general public next fall, will attract attention.
“I am convinced that there will still be growth, but perhaps not as strong as we saw during the pandemic,” said Claude-Frederick Robert.
Questrade’s director of marketing, Rob Shields, is just as cautious. “Our industry has witnessed unprecedented changes in the behavior of customers who have turned to online brokerage. However, we see a correction when the pandemic ends and society returns to normal. ” Business More
The American side is already showing signs of slowing down. The Robinhood platform (HOOD, $ 10.11), which was the main driver of GameStop or AMC growth in early 2021, lost 1.8 million active monthly users in the first quarter of 2022 compared to the same period last year. At the end of April, the company also announced the dismissal of 9% of full-time employees.
“I would be very surprised if the enthusiasm for self-investment persists, because it is usually closely linked to market performance,” said Fabien Major, financial planner at Assante Wealth Management. As markets grow, the excitement grows. When markets fall, people despair and let go. ”
A find that follows the story of Jean-Sebastian Ranger, this investor who no longer uses the online brokerage account he created at the start of the pandemic. “I think investing alone is like gambling. And I’m not very playful (gambler),” he says.
“I was attracted by greed,” admits Julien Lemé, who is also less enthusiastic about the evolution of his stock price than he was a year or two ago. “Over time, you realize that money doesn’t just fall from the sky.”