Investire | June 2020
Back in 1999, we conducted the first Italian research on online trading for Credito Italiano. CONSOB had just released the first regulation implementing the Legislative Decree 58/1998 (the Consolidated Law on Finance), following which financial markets were sanctioned by rules.
In fact, in Italy online trading came into being in 1993 when Borsa Italiana decided to extend transactions to brokerage companies (SIM) and to accept their online mediation. Directa Sim, the first brokerage company offering a platform for online trading operations, was founded in 1995.
The expansion of online trading took place in 2000 thanks to the global spread of the Internet; in the midst of the dot-com bubble, markets and stock exchanges saw Internet and dot-com companies as the future.
In terms of supply, today the Italian market of online brokers looks quite condensed: there are 250 brokerage companies, of which the first five represent 80% of the market (Fineco, IW Bank, Webank.it Banco BPM, Sella and Directa Sim).
In terms of demand, there are about 20 million users of bank accounts with online access in Italy. 3,6 million of them hold a securities account, but only 2,2 million of them manage their securities portfolio online (11% of online account holders).
Among them, active traders (1+ filled order per week) are about two hundred thousand, while heavy traders (several filled orders per week and intraday activities) are fifteen thousand, amounting to 0,01% and 0,00075% of online account holders respectively.
These figures still allow for the acquisition of substantial profits; often counter-cyclical compared to market trends and the developments of financial consultancy, they can compensate for the reduction of profit margins of brokers belonging to banks, as it is the case today.
However, these figures seem almost inconsequential when compared with the estimates made twenty years ago: in fact, before the dot-com bubble, many believed that online trading would soon replace banks and financial advisors.
Moreover, the figures seem low given that in Italy the number of clients supported by a financial advisor has been growing, reaching well over 4 million people and registering an increase even in March 2020.
The number of traders is relatively low. However, traders are unsatisfied with the available platforms (85% of them claim to be entirely unsatisfied) and the costs (72% of them claim to be entirely unsatisfied); half of them (51%) feel rewarded for their ‘DIY activity’, so to speak, despite one third (34%) having lost money (Source: FINER Finance Mirror; sample: 10.400 end investors).
To say it with a metaphor, in an age when certainties melt like snow in the sun, it is better not to underestimate the dangers of the DIY, the ‘do it yourself’. Financial advisors need to take up the challenge and disprove with numbers the old saying, if you want a thing done well, do it yourself.