Investment platforms have reported a spike in new account openings since the coronavirus pandemic triggered a market sell-off, as investors look to pick up shares in a tumbling global market and find safe havens for cash.
The Share Centre reported a 269 per cent increase in brokerage account openings from March 9 to 30, compared with the same period in 2019. The month of March is typically busy for investment and savings accounts as the Isa season reaches its height, but the numbers have exceeded the expected annual uplift. Half of all accounts opened on the platform since February 17 were opened in the final two weeks of March.
Interactive Investor, the UK broker, reported a 119 per cent increase in the number of Isa accounts opened on its platform between February 18 and the end of March compared with the previous year. The number of self-invested personal pension (Sipp) accounts opened was also up almost 50 per cent over the same period. Interactive Investor has reported record trading volumes since mid-February.
“Volatile markets could be a factor as people look for buying opportunities,” said Moira O’Neill, head of personal finance at Interactive Investor. “In these volatile times, it could also be that investors are looking for a secure home for their cash.”
Vanguard UK reported a three-fold increase in the number of new accounts opened in the first quarter of 2020, compared with the same period in 2019. Account openings in March were up 60 per cent on the previous month.
Vanguard UK has experienced rapid customer growth as it expands its share of the UK market, doubling its customer base in the past year. “We have seen that trend accelerating [since January],” said James Norton, senior investment adviser at Vanguard.
The price correction in the equity market is one factor, he said. “Whether you describe it as buying into the dip or cheaper equity valuations, all of those are indicators that now is a better time to invest,” said Mr Norton. He added that it is easier than ever to open an investment account from a mobile phone with a small sum of money, and investors have dozens to choose from.
“Many of these investors may get hurt in the short term,” he said, as the market may continue to fall as the extent of the economic damage wrought by the coronavirus pandemic remains unknown.
Netwealth, a wealth manager, said that new general investment accounts — taxable accounts opened by new and existing customers that would not be boosted by the looming end of the UK tax year — were up 90 per cent in the first quarter of 2020, compared with the first quarter of 2019.
Charlotte Ransom, Netwealth chief executive, said the latest spikes experienced by online platforms were all the more remarkable in light of the fact that the beginning of 2019 was also a period of rapid growth for account openings, as an optimistic UK rebounded from a market sell-off in late 2018.
“You see that people tend to buy in the market when there is the expectation that it will go up,” she said. “It’s quite surprising to see this level of interest . . . There’s an understanding that it is very difficult to time. Very few people are convinced that this is the bottom.”
She added: “Even if we haven’t yet seen the full capitulation, there is clear long-term value accumulation for investments.”
Hargreaves Lansdown, the UK’s largest DIY investment platform, declined to provide numbers on account openings, but noted that more young investors had signed up than usual as the cost of entering the market fell. The FTSE 250 has sunk to its lowest level since 2013. Danny Cox at Hargreaves Lansdown said: “We have seen elevated demand for new savings and investment accounts, with a slightly younger profile than we would normally expect.”
Interactive Investor said the rapid account growth on the platform was also led by younger investors. Nearly 40 per cent of accounts opened between February 18 and March 18 were by users under the age of 34, compared with just 18 per cent of accounts over the same period in 2019, a 111 per cent increase.
While account openings fell 10 per cent over the year among 35- to 44-year-olds, and by 7 per cent among 45- to 54-year-olds, according to Interactive, Isa allocations from 30- to 44-year-olds were also up 30 per cent.
“You can speculate that they’ve had the resources to allocate to their Isa allowance,” said Richard Wilson, chief executive of Interactive. “They’re not spending on holidays — everyone’s ski holidays have been cancelled.”
Ms Ransom noted that the majority of the customers opening accounts on Netwealth’s discretionary platform rolled existing accounts over from other DIY investment providers, or were sitting on cash, rather than opening their first account. “If you’re living through a volatile period, I don’t think many people would back themselves to navigate this,” she said. “They’re thinking it might require some professional expertise.”
Other investment platforms have been overwhelmed by the levels of demand for their services.
Halifax and iWeb, subsidiaries of Lloyd’s Banking Group, have both suspended new account openings for the time being, and asked that clients only phone customer service helplines if they are in an emergency or facing a vulnerable situation. Halifax Share Dealing said the platform had suspended new accounts as it was already struggling to support its existing customers.
