Where now for hybrid advice models?

Dan Jones

Days like Monday November 9 don’t come around too often in markets.

The reaction to the announcement that a plausible Covid-19 vaccine might be on its way was swift and decisive: airline, pubco and cinema shares were among those that jumped by significant amounts in a matter of minutes.

And when share prices are moving sharply, retail investors want to get involved. But many were left disappointed by their inability to participate.

On these shores, companies like Hargreaves Lansdown, AJ Bell and Fidelity saw their sites sag under the weight of interest.

Hargreaves said its site had experienced its busiest ever day. It was a similar story in the US, where leading broker Charles Schwab’s site went down, and there were reports of problems on several others.

Given how quickly prices reacted to the Pfizer news, November 9 was also a prime example of how timing the market is all but impossible.

But whether or not these outages saved investors from themselves is besides the point. Investors wanting to rotate their portfolios – for the short term or for the long term – struggled to do so.

Much has already been written about the boom in retail investing seen in the US in recent months.

Online infrastructure has yet to catch up: this wasn’t the first time that growing retail volumes have created issues for big platforms this year.

In the US, Vanguard previously experienced problems on August 31 when both Apple and Tesla announced stock splits.

Newer services like Robinhood were dogged by repeated issues during March’s market slump.

From investment professionals’ perspective, the rise in retail trading volumes has prompted some stimulating debates.

D2C investors have been blamed in some quarters for increasing market volatility. At other times, their activity was said to have put a floor under the price of popular US retail shares like Tesla.

But the events on that Monday remind us that the retail buyer remains very much the little guy trying to operate in a big machine.

Each time a trading platform proves unable to cater to demand, the merits of turning to an intermediary might loom larger in investors’ minds. If you can’t beat them, join them.

Temporary outages, however inconvenient, are never going to be enough in themselves to drive investors to an intermediary. But they will remind D2C investors that a DIY approach isn’t always as user-friendly as it first appears. With every incident, having access to professional and reliable platforms becomes that little bit more important.

A cynical intermediary might note that adviser platforms have had plenty of problems of their own in recent years. But the nature of collective investing means they don’t, at least, suffer from the same kind of volume surges.

Advisers’ own technological capabilities have changed somewhat this year, of course. That too should put them in a good light when set against retail-oriented investment propositions.