Page 4 - DIY Investor Magazine - Issue 27

......WHAT ON EARTH IS A DIGITAL WATCH?
It is more than twenty years since online share dealing platforms brought the City to screens the length and breadth of the country; the internet delivered information on demand and tools and techniques that had once been the preserve of the pin-striped, to the masses.
But that was far from the end for Farquhar and the thoroughly nice chaps that Harry Enfield lampooned because access to trading technology does not a trader make. Just because you have access to global markets, a giddying choice of financial products and the ability to ‘accept’ a 15 second quote, doesn’t mean you should.
So for many years the number of people using technology to take personal financial control remained relatively low with around 2m people ‘in the know’.
Then in its 2012 Retail Distribution Review, the government started to debunk and democratise investing and push for greater transparency; realising that the ‘free’ financial advice they were receiving was anything but, many joined the DIY investing fraternity.
DIY Investor Magazine launched in 2014 in recognition of the fact that things were changing; no longer could the state be expected to deliver later life care or even income in retirement and with the burden of tuition fees and spiraling housing costs, there was increasing pressure for people to take personal financial responsibility.
For the first time issuers of the whole gamut of financial products and services targeted DIY investors with accessible and engaging content; we believed, as we believe that improved financial education and engagement are key to achieving better financial outcomes.
Now, with perhaps one eye on the opportunity, and the other on the threat, the pandemic has massively accelerated the growth of DIY investing, with brokers and platforms reporting record levels of business with a noticeable increase in younger investors.
But, as the punch line to a childhood joke would have it, the most dangerous part of a car is the nut behind the wheel; the self same technology that can support a long term wealth creation strategy allowed disciples of Roaring Kitty to come together on Reddit to attack the hedgies on Wall St by ramping GameStop shares.
Once confined to the money pages, brokers’ ads are now commonly found in news sections and sprinkled on TV and radio, reaching out to the mainstream; Boring Money predicts that online DIY investments will hit £385bn in the next five years with almost 7m investors.
As witnessed by the recent announcement that Scalable Capital would exit the UK market, the robos have struggled to sell the benefits of improved long term financial outcomes over instant gratification; at the same time ‘traditional’ brokers have been consolidating to take advantage of economies of scale which has led to some issues – ‘Platform services creak with customer surge.’
This feels bitter-sweet; the fact that people are engaging with their finances as never before is a source of great satisfaction and an endorsement of our raison d’être.
However, access to technology is just the beginning; less experienced investors will have different information needs and possibly require more attention than the more sophisticated.
A successful long-term DIY investment strategy can deliver life-enhancing improved financial outcomes and we believe brokers have an important role to play by ensuring they provide appropriate and compelling content to enable investors to use their technology to maximum benefit.
With high hopes for the vaccine, let’s hope that the surge in DIY investing, and in particular ESG investing are indicators that Britain is starting to build back better.
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DIY Investor Magazine | Mar 2021 4