Domestic equity markets strengthened in the third quarter of 2012 and helped contribute to a $9.5 billion expansion in the online/discount brokerage (ODB) business. The channel ended the quarter with $257 billion in assets, eclipsing the previous high-water mark by a narrow margin. ODB accounts edged up by 1% in the third quarter, and as a result, the average account size grew to $55,500.
Despite the growth in assets and accounts, activity in the channel has been on a downward trend. Transaction volumes, gross new account openings and revenues, all recorded double-digit declines compared to the same quarter a year ago. Over a longer time frame, trading volumes fell to a four-year low, total revenues decreased to a two-year low (commission revenues have fallen to their lowest levels since 1999), and the third quarter of 2012 was the lowest third quarter gross new account opening total in four years. The activity metrics in the advice-based full-service brokerage (FSB) channel were in contrast to the trend observed in the ODB channel. In the third quarter of 2012, FSB revenues recorded a slight increase, supported in large part by growth in fee-based program revenues. Transaction volumes also declined at a significantly lower pace than the ODB channel.
Self-reliant investors in the ODB have elected to sit on the sidelines in the recent periods of market volatility, as evidenced by the swelling of the balances held in deposit-based products (cash balances, HISAs, and GICs) over the trailing 12-month period. With the recent launch of BMO InvestorLine’s adviceDirect, it will be interesting to see whether an advice-assisted program can coax inactive ”do-it-yourselfers” off the sidelines. Investor Economics will continue to monitor this development closely.
For more information and up-to-date statistics on retail brokerage channels, please refer to the upcoming edition of our Retail Brokerage and Distribution Advisory Service http://investoreconomics.com/issue/the-retail-brokerage-report. Posted by Matthew Goldstein Matthew@iei.ca.