Finding the best brokerage
Once considered impossible or even unthinkable, low and even sub-zero interest rates seem to be here for the long haul. The effect is clearly felt by savers, who are confronted with quasi-zero interest yields. This in combination with a — some might say overheated — US stock market breaking record after record, is driving more and more savers to the financial markets. In order to reach their financial goals, this and future generations will have to act more creatively than past generations did.
Banks and financial institutions have grasped this message and are there to help the new investor. Under the guidance of their bank, the investing-neophyte can choose from an entire plethora of formulas. As a new market-participant, she will often end up buying a ‘house-fund’ associated to the financial institution, or leave her portfolio to be ‘managed by the experienced hands’ inside the bank in some other way — all the while paying a premium for this service.
Not everyone though. Together with a growing number of market participants, there is a growing understanding that investing in the stock market doesn’t need to be overly complex.
We analyzed the largest brokerage platforms available to her and tried to consolidate which criteria each platform needs to excel at in order to service this class of active investors. In the second part of the article, we describe some trends we spotted on the European market — that were not yet present at the moment of our research in the Belgian market.
Criteria for the modern retail broker
Ranging form client experience all the way through costs…here are some criteria an online brokerage platform needs to excel at if it whishes to gain or even maintain customers.
Client onboarding
When sitting on your couch with your tablet or having a break at work, what you don’t want is spending too much time on “administrative”. It must be easy, simple, like the “1-click purchase” on Amazon. We are in 2019, being digital must be a priority. Let’s be honest, you will definitely favour the platform that will allow you to open an account by just using a card reader instead of the one that requires you to send paper documents by post.
Product coverage
From trackers to forex, that’s a personal taste. Make sure to pick up on yours
Markets
Of course, not everyone is interested by the Shenzhen Stock Exchange, but before opening an account you have to be sure that the offer matches your needs.
Features will make the use of the platform more or less easy First of all, is the interface user friendly. If you are already making a strange face when looking at a platform for the first time, it’s not a good sign. But also, do they provide an app for your smartphone?
Fees
The less you pay, the best it will be for your pocket ! Make sure they are always clearly indicated…
Investment tools
Academy, real-time data, robot advisory, … it’s like choosing your car with the best suited options. ‘Mind the gap’ — from Belgium to Europe At DynaFin we are not happy just analyzing the current state of the market. In our role as consultant, it’s imperative we know where the market is headed. Expending out field of vision from Belgium to include other European counties as well — gave us a good idea where the Belgian market of brokerage platforms is lacking at the moment. Expect these gaps to be closed soon — as the competition to connect with the retail investor is heating up.
Social trading
That’s a fact, social media becomes increasingly important in the life of the users. So, why not including some social part in an online brokerage platform? You wish to interact, follow and copy the portfolio of some popular investors? It is now possible! You can even join a program to become one of these popular portfolio managers and get paid.
Demo / virtual account
You don’t want to take unnecessary risks in your day to day life. It’s the same with your account, and especially with your money! It is always better to have demo / virtual account in order to be sure to understand your platform and also … make a good crash test. You made a mistake? It’s OK mate, it’s better to do it in virtual than in real.
Customer support
Imagine; it’s the evening, house is quiet and you’re no ready to shake the market. Boom. Problem.
If the helpdesk is only available from 8 to 5 it’s a massive drawback considering that you’re following the US market. From phone support to chat, what possibilities is offering your chosen platform?
Minimum deposit
From 1€ to sometimes 2.000€, always check the conditions. The cheapest platforms are not always the ones asking for a low deposit.
Educational path
Do you know the difference between bid and ask? Sometimes these questions are logic, the vocabulary could be difficult to understand without a proper definition AND explanations. That’s why a good educational path must give you some good lessons in order to understand your environment.
Deposits and withdrawals options
Remember your sofa and your tablet that we spoke previously? Good, imagine ready to invest. Bad news, your only possibility to invest is to make a transfer that will take 1 or 2 days. Seriously? I can pay my coffee wirelessly with my watch but I’ve to wait so long to see my money arriving in my account? More and more platforms are now offering payments with Visa, Mastercard, PayPal (that could be linked directly to your bank account) “Bancontact”, … instead of losing a good opportunity to invest due to lack of funds, what’s your best funding solution and also, how will you withdraw your money?
Regulation
Last but not least. Always check where you best future platform is regulated. If you stay in Belgium, it will be pretty secure. But if you go exotic, it will depend from the country where the platform is based.
Besides these gaps between the European market for retail brokerage and the platforms active in Belgium — there is no shortage of other trends and evolutions waiting to happen. Free investing, gamification, mobile only, the commercialization of data,…are all right around the corner. Expect increasing competition in the years ahead, where every brokerage has one goal in mind : to best service the customer, to gain her trust, and ultimately, her business.
With an expensive network of consultants with real, hands on experience, working in multiple major financial institutions in Belgium — we at DynaFin have the expertise and the network to help you shape the future of financial services.