Spreadbetting stays strong as stock market recovers - 27.07.2009
Financial Times
Spreadbetting volumes have remained very buoyant in the first half of this year, even as market volatility has reduced and share trading recovered, according to a ComPeer analysis.
In its UK Wealth Management Industry Report 2009, the research firm also reports a 12 per cent annual increase in the number of ‘execution-only’ (no-advice) investment accounts to about 3m – the highest in the past decade.
“This (growth in no-advice accounts) is mainly about the move to financial DIY,” said ComPeer senior analyst
He said that for wealth management firms without an execution-only service, the last year had been an “opportunity missed”, as no-advice firms registered a 134 per cent jump in spread bet trades and a 17 per cent increase in fund trades.
The proportion of execution-only trades that were online – rather than by telephone or post – also rose above 80 per cent for the first time earlier this year.
The strongest growth in spread-betting and contract for difference (CFD) volumes was in 2008, a year of heavy market falls and unprecedented volatility. But ComPeer also reports that spread-bet volumes were 60 per cent higher year-on-year in the first quarter of 2009, while CFD volumes showed 12 per cent annual growth over the same period.
At the end of 2008, wealth managers in the controlled £335bn of investment assets, generating £4.04bn of revenue and £998bn of pre-tax profits in the year. Assets under management fell nearly 17 per cent, against a 33 per cent drop in the FTSE All Share index, and net investment inflows were down on the previous year.
Interest earned on portfolio cash showed further growth as a revenue source in 2008, but is expected to come under pressure this year following the base rate falling to a 0.5 per cent low. Execution-only firms earned just under a third of their revenues from interest last year – a rising trend that has seen no-advice brokers become progressively less reliant on commissions.
One future growth opportunity for the wealth management industry is in pensions, says ComPeer, given the continued decline in defined benefit schemes.