UK Stockbroker News Bulletin – May 2023

Welcome to the latest edition of our industry news roundup, focusing on the latest developments that impact UK stockbrokers, investment advisers, and wealth managers. Our aim is to provide readers with valuable information to compare UK stockbrokers and stay informed about the latest trends in retail investing.

In this edition, we bring you the following updates:

  • Vanguard looks lower in the age demographics for new clients
  • Twitter & eToro ‘tie-up’ to refer new trading clients to the popular broker
  • Hargreaves publishes mixed results to shareholders

Vanguard eyes up the investing youth

Vanguard, the massive asset management company with $7.2 trillion under its belt, has revealed that nearly 40% of its new clients on its personal investing platform in the UK last year were under the age of 30. The company, known for its focus on passive funds, stated that its direct-to-consumer platform in the UK continues to attract investors of all age groups but has a particular appeal for the younger crowd.

The success of Vanguard’s UK platform is attributed to its low-cost, long-term investment approach. In 2022, it brought in 118,000 brand-new clients and achieved net cash flow of £3.5 billion. Since its launch in April 2017, the platform has accumulated 485,000 clients and manages £15.2 billion in assets.

As statistics, these are impressive. But this user base represents less than 1% of the UK population, demonstrating ample room for growth.

Vanguard exclusively offers its own products on the platform, including 86 funds encompassing active, index, exchange-traded funds, and multi-asset options. Investors are charged a platform fee of 0.15%, capped at a maximum of £375 per year, along with an average fund fee of 0.2% and transaction costs. The cheapest equity fund offered by Vanguard (its FTSE 100 Index Unit Trust) carries an astonishingly small fee of just 0.06%.

Industry experts see Vanguard’s growing popularity among younger investors as an encouraging trend. The company’s heavy advertising efforts, including a YouTube video with 11 million views, have contributed to its success. Other asset managers and fund provider platforms like Hargreaves Lansdown, AJ Bell, and abrdn-owned interactive investor are likely keeping a close eye on the type of clients Vanguard is attracting, considering the company a formidable threat compared to smaller “robo” offerings.

The rise of Vanguard’s direct-to-consumer channel highlights the appeal of vertical integration as a strategy for fund firms. However, the company recently announced the closure of its UK financial planning arm due to a lack of sufficient clients meeting the £50,000 minimum investment requirement at a cost of 0.79% per year.

Twitter agrees to let eToro tap into 330m active users

Twitter and eToro are teaming up to bring real-time stock and cryptocurrency information to their users. This is an expansion of Twitter’s Cashtag feature, which used to give you limited data on stocks and crypto using TradingView. But now, it’s being expanded through this strategic partnership. 

Introduced back in December, the Cashtag feature allowed you to search for symbols like $GOOG to see prices right in your search results. Well, now eToro is joining the party and making it even more exciting. They announced that they will provide access to real-time prices for a wider range of stocks, crypto, and other assets.

But it doesn’t stop there. This collaboration is more than just displaying information. When you search for a stock on Twitter, you’ll see a button saying “View on eToro.” Clicking that will take you straight to eToro’s site, where you can get your trading on!

As for the nitty-gritty details, we’re not sure if eToro is paying Twitter for referred traffic. They haven’t spilt the beans on that yet, although one imagines this will need to be disclosed for transparency, depending on the territory Twitter is being used in.

According to eToro’s CEO, Yoni Assia, this partnership aims to tap into all those financial market discussions happening on Twitter. He’s excited about the high-quality, real-time financial analysis content available on the platform. Together, Twitter and eToro hope to reach new audiences and make the world of finance even more accessible.

This announcement raises the prospect of further tie-ups that could be possible. Will the watchers of #Fintok videos on TikTok soon be prompted to sign-up with a UK broker to take advantage of the inspiration they’re receiving on the app? Aggressive selling tactics may face a backlash due to the young average age of the typical user of the TikTok app

The stock market coverage on the video platform is often over-simplified and encourages short-term punts. This investing behaviour would not be likely to earn a user a positive return over the long term, risking reputational damage for TikTok or any other social media platform that pushes these financial services onto their users. For this reason, platforms such as TikTok should tread lightly when wading into such a minefield.

Hargreaves Lansdown struggles to meaningfully boost client demand but avoids rout

Hargreaves Lansdown, the DIY investing platform, experienced a boost in its quarterly results due to customers rushing to use their Isa and Sipp allowances before the tax year ended and a return in investor confidence. 

Assets under administration increased by 4% to £132 billion in the three months leading up to March, and net new business rose by 14% to £1.6 billion. However, asset retention was lower than in the same period last year, partly due to clients needing cash withdrawals. 

The company attracted 23,000 new customers during the quarter, compared to 31,000 the previous year. Despite moderated market flows, the cyclical push by retail investors to maximise their contributions to Stocks & Shares ISAs will have contributed to the significant improvement in net new business. 

Share dealing volumes also saw an increase of 23% compared to the previous quarter. Hargreaves Lansdown CEO, Chris Hill, expressed optimism about the future and highlighted the company’s efforts to support clients through new products and services, such as a new cash ISA, which HL claims is it’s most cash offering yet.