Online platforms allow ‘the man on the street’ to invest directly in shares. At FNB we needed to take this important consideration into account when designing our own online platform, which is aimed at coming to grips with satisfying that need. We estimate we have grown the segment since launch in November 2008 by about 10% by attracting new users into the market, and that has to be good news for everyone.
Local Investment Trends
South Africa remains sadly behind when it comes to private ownership of listed shares, and even further behind in online trading, notwithstanding the latter’s rapid growth. However, statistics of black economic empowerment (BEE) share ownership have now propelled South Africa to levels of private share ownership that rank alongside those in developed countries.
As recently as five years ago there were not yet one million private investors active on the JSE (about 2,5% of the SA population), and even today they own barely 1% of the total value of the JSE.
Choosing Online Trading
Online trading would appeal to those investors who enjoy or feel confident enough to go the ‘DIY’ route and want to take control of their own financial destiny and build their wealth online. Our research reveals that this strong psychographic trait is what separates the online investors from those who prefer to consult a broker. Obviously there are times when the private investor is going to doubt his own ability, for example when his portfolio is not performing or when the market is particularly turbulent. At this time, the online investor may want to talk to a broker.
For the new investor, selecting which share to buy or sell can be a daunting task. There is a deluge of information out there that can be quite paralysing.
Education has long been identified as the primary barrier to online investing, and we, like most online platforms, have addressed this challenge.
To begin with, we have constructed our products to be as simple and easy to use as possible. For example, we understand that the share selection decision is a difficult one, so we have developed our Share Builder with its pre-selected basket of shares. We keep the language that we use simple and easy to understand. We consistently use the word ‘shares’ and don’t confuse the issue with ‘stocks’. Demystifying the world of shares is something we are passionate about and it starts with getting around all the financial jargon. In addition, we have an extensive online Education Centre, including calculators, focused on assisting investors in getting started in shares on our website.
Free to all is our newly launched ‘Share Swarm’, which is an innovation in the display of share market information. The innovation stems from a collection of customer insights that, once analysed, indicated that certain customer segments find traditional displays of stock market data overwhelming and hard to decipher.
Share Builder also offers affordability, which is vital to the beginner who is price sensitive. Our admin fee is R17, which we have maintained at this level since launch. We know that the beginner does not trade frequently in a month, and also finds transaction pricing in the market confusing and prefers a flat fee per trade. That’s why we charge a flat 2% of the value of the trade which makes small trades of around R2 000 very competitive. No other costs except VAT apply.
For the more experienced investor we offer Share Investor, with a monthly fee of R45; a transaction fee per trade of 0,6% of trade value with a minimum of R80 per trade. This transaction fee is exclusive of IPL, STT, STRATE and VAT charges.