The emergence of new customers accelerated in March, when Wall Street was sunk
With the collapse of markets due to the new coronavirus, online brokerage houses in the United States seduced a segment of new young clients, newbies and eager to win with falls; a strategy not without risks.
“We appeal to a younger audience,” says JJ Kinahan, director of TD Ameritrade.
The financial operator pointed out that the brokers benefit not only from the increase and rejuvenation of the clientele, but also from a greater activity of investors so far more fearful.
Charles Schwab and TD Ameritrade, which announced their merger late last year. Each obtained 600,000 new accounts between January and March.
Rival E * Trade, acquired in February by Morgan Stanley, reported the creation of 363,000 new accounts in the first quarter, representing a 170% increase over the same period in 2019.
The Robinhood platform, very popular with people in their thirties, had records and investment volumes at record levels. In early May, he said he created about three million accounts in 2020.
The irruption of new clients accelerated in March, when Wall Street was sunk and thus gave opportunities to take the first steps to newbies. The stock bounced in April, but then fell again.
For J.J. Kinahan, confinement to deal with the pandemic and slowing economic activity were also key factors for online brokers.
“As people stayed at home, and some entered technical unemployment, they had time to understand and interact in the market,” he stressed.
Moti Berovin, an engineer with defense group Raytheon Technologies, took advantage of the downturn in the airline industry to buy Delta Air Lines shares in Robinhood at a low price.
“The stock market is so volatile that it is possible to do good business by buying a stock at a good time,” said Berovin, 32.
“When the stock market really comes out again, you can expect interesting gains,” he added.
The attraction to sectors in crisis also reflects the specific concerns of young generations.
“If you are 25 or 30 years old, you do not think you can get sick, and they tell you that you will be among the first to return to travel on cruise ships when older adults must keep their distance,” says Kinahan, explaining the interest of young people in the actions of the Carnival cruise company.
The technology sector is also highly sought after by millennials who use the services or products of companies in this area on a daily basis. Berovin bought shares in several virtual sports companies.
– Fractionation for small investors –
For months, brokers have been multiplying measures to attract small investors.
In October, Charles Schwab, TD Ameritrade and E * Trade removed the purchase and sale commissions for stocks and other stock products made online in the United States and Canada.
Charles Schawb plans to propose from June to buy expensive shares of shares such as those from Amazon, Netflix or Alphabet, Google’s parent company. Other companies such as Robinhood, Fidelity or SoFi already offer that service.
To take advantage of the attraction of the platforms, the bank JPMorgan Chase launched in 2018 its own brokerage application called You Invest, and makes the first 100 transactions for free.
For specialists, the massive opening of new accounts has dangers for those who lack experience. “The greater the short-term vision, the greater the risk,” says JJ Kinahan.
“But we are pleased to see that more and more people are educated,” he added, noting that the use of financial tools offered by his company tripled in the first quarter.