Retail trading volumes have taken a dip in recent months. While many brokers have seen waning metrics due to volatility, there may, in fact, be other trends afoot that collectively damper trading volumes.
A recent study in Canada from the Investment Industry Regulatory Organization of Canada (IIROC) surveyed the domestic population.
The study found investor confidence and knowledge were primary determinants of trading aversion.
In fact, the study determined that over 50 percent of Canadians actively avoided investing for these reasons.
The study surveyed 2,000 Canadians, of which 500 of whom were categorized as “aspiring investors” or those who are interested in but are not currently investing.
Based on the results of the survey, most aspiring investors were over the age of 40 (68 percent) with post-secondary education (70 percent). Nearly half (45 percent) are in the workforce, and almost a third (30 percent) are retired.
Notable survey results
The trends highlighted in the survey were quite surprising, given the general strength of the economy in recent years and increases in personal income.
For example, approximately 49 percent of Canadians surveyed said they do not invest because they don’t know enough about it.
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Out of the 2,000-person sample, 60 percent of respondents were also not confident in their ability to make investment decisions.
Furthermore, over 61 percent of Canadians do not know the options available to them for getting investment information and advice.
Finally, 65 percent of Canadians do not know what investment products and services are available to them.
This is in line with other trends brokers have been aware of for years, correlating education positively with trading success.
Not surprisingly, many brokers have looked to remedy this trend, putting an emphasis on trading education and free resources at the disposal of clients.
Perhaps highlighting a generational gap, aspiring investors were also shown to underscore a disparity in confidence with existing investors.
For example, current investors are much more confident, with a full 80 percent expressing confidence in their ability to make investment decisions. This contrasted with only 40 percent of aspiring investors.
Moreover, 41 percent of aspiring investors do not think they have enough money to get advice from an advisor, and more than nearly one quarter (28 percent) do not think they can afford to get advice.
The results are informative for brokerages and financial service providers not just in Canada, but elsewhere. It will be interesting if any venues take steps to address any of these findings moving forward.