COVID-19 has loosened the digital barriers, and online investing is becoming the new normal
Digitalization had already set in in the pre-COVID times, with people relying more and more on online brokers and digital wealth management platforms. The recent years saw substantial growth in the number of investors turning to digital media. However, with the pandemic and the associated shutdown, the digitalization in wealth management experienced a massive surge. COVID-19 has further loosened the digital barriers, and online investing is becoming the new normal. The economic and financial crises during the coronavirus pandemic have made people revisit their financial position, stability and spending habits. Individuals are more concerned about the future and if they are saving enough for contingencies. The spending has reduced across all industries and savings and investing have experienced an upsurge.
The reports and statistics from the leading wealth management firms support the claim entirely. One of the largest online brokers in Europe, DeGiro, reported a waiting list of 30,000 new customers in May 2020. Thee created the waitlist as the number of new applications per day jumped from 500 to 5,000 during COVID-19! The company also reported 137,000 new customers in the first quarter of 2020, with 86,000 new account openings in March itself. According to research by deVere, the coronavirus crisis drove a 72% rise in the use of Fintech apps. The stock market presented investors with massive trading opportunities because of high volatility associated with the pandemic. The Dow Jones crashed by 6.7% while the S&P 500 dropped by 8.1% within ten days during the pandemic. The trading volumes flew through the roof with almost everyone trying to take advantage of the opportunity. Both experienced and amateur investors grabbed this buying opportunity.
Apart from the unprecedented surge in the trading volume in the stock markets, new signups for digital wealth management are setting new records. New investors who were neither trained nor interested in the cumbersome nuances of picking stocks such as reading financial statements and performing qualitative and quantitative analysis but wanted to invest in stocks and shares used other methods such as ISA and GIA for their investment options. This resulted in a boom in new accounts not only restricted to online brokers but also new ISA account opening and GIA account openings. The Share Center, a service provider for buying and selling shares and making investments online, reported a record increase in the number of ISA account openings in March 2020. Many of the leading wealth management firms reported strong results for Q1 2020. For instance, Credit Suisse International Wealth Management reported a 6% growth in operating income and UBS Global Wealth Management, a whopping 14%!
Multiple factors account for the growth in the number of people looking for digital wealth management platforms and new account signups. First, the pandemic and shutdown stealthily gave people the gift of time. It eliminated the time-consuming tasks, daily distractions and stress felt by the general population. Individuals instantly had more time than they ever had in their lives, and they could look at their financials. With a lot of time at hand, they started researching the stock markets and showed higher interest in digital methods of investing and wealth management. Hence, the surge in new brokerage and investment platform account openings.
Besides the avenues of making profits, the uncertainty about the future has also hit the investors hard. Many individuals are losing jobs and rising unemployment has made people more careful about their spending habits and more cautious about their retirement plans. It has led to an upraise in the number of new SIPP account openings. Interactive Investor, one of the UK’s leading online investment platforms, saw a 50% rise in the new SIPP account openings in March 2020. Thus, the coronavirus pandemic has had a widespread impact on the digital wealth management platforms. Several new investors are coming in to capitalize on the market opportunities, especially the ones with high disposable income. Many existing investors are also shifting their focus from traditional trading and investing in digital platforms because of the low costs and high accessibility associated with the online wealth management platforms. The surge does not seem to be temporary either. We expect the spending habits and investing patterns of the millennials to remain the same long after the pandemic is over, and this will favor the further growth and expansion of the digital wealth management platforms.