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As the number of on-line investors grows in Europe, their profile will change dramatically, forcing banks and financial institutions to change with them.
By 2007, there will be an estimated 56,000 individuals in Ireland who perform on-line stock, bond and fund trades over the Net, compared to around 18,000 currently, according new research from Forrester. Indeed, across Europe the number of people who trade stocks and bonds on-line is expected to rise from 3.2 million this year to close to 10 million by 2007. The biggest market by far will be Germany, Forrester claimed, which will grow from 1.7 million estimated on-line traders in 2002, to almost 3.5 million in five years.
But as the number of traders rises, the kind of people who actually make trades will change dramatically, Forrester said. Charlotte Hamilton, the author of the report, admitted that the figures are likely to be slightly different from country to country, but the statistics show that across Europe, more and more traders will come on-line who can only be classified as "cautious."
Currently around 35 percent of Europe's Internet investors are classified as "get rich quick" traders, a group that is described as non-affluent but very active. A mere 13 percent are "cautious savers" while 29 percent make trades slightly more often, but are still relatively cautious. Forrester calls this group "nest egg normal."
Get rich quick traders, on average, completed around 19 transactions per year, while "nest egg normal" and "cautious" traders completed one and two respectively per year, according to the Forrester data.
But by 2007 this "nest egg normal" group will expand slightly to encompass 31 percent of traders as the European market grows from 4.09 million to nearly 10 million. The biggest growth will in fact come from cautious savers, who by 2007 will account for 24 percent of the market. "Get rich quick" traders will see their relative numbers fall to just 23 percent of the market.
All of this suggests that as banks and other financial services companies move forward, more products need to be put on offer that will be geared toward cautious investors. As Hamilton describes it, banks and on-line trading companies will need to launch more "hand holding" products.
The increasing rarity of the so-called "day traders" of the Internet boom is having an impact on the revenues of many of the larger brokerage houses who depends on high-frequency traders. This week, discount brokerage Charles Schwab said it had plans to slash around 10 percent of its staff, or about 1,880 employees, to cope with weak client trading volume.
The business also said that it might fail to meet its third-quarter earnings forecast. Schwab said that in August, it processed a daily average of 117,500 revenue trades, down 25 percent from July. In the first nine days of September, trading volume fell even further to an average daily volume of 100,000 trades, the company admitted.
Most analysts agree that Schwab, which cut 25 percent of its staff last year and a further 350 jobs in August, will continue to struggle until retail investors become more active once more.
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