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.
Take robo-advice, which was already struggling to take off in the UK. Standard bearer Nutmeg has invested millions in marketing, but is yet to turn a profit – and it’s far from alone.
Recent years have also seen wealth managers pull back from robo-advice – UBS doing so in 2018 and Investec following suit last May.
Barclays launched its own automated advice service for customers with £5,000 or more this summer, but other big names have gone quiet on their own plans.
Research published a year ago by the Financial Conduct Authority showing “substantial resistance” to robo-advice, particularly among older generations, was another blow.
There’s still the perception that these models are designed for younger generations, but law firm Linklaters noted earlier this year that many robo-advisers working with the FCA’s advice unit incubator are focused on at-retirement models.
Nonetheless, this year might have given many investors – professional or otherwise – pause for thought.
Those dabbling in robo-advice would have almost certainly felt the absence of a reassuring voice amid March’s market plunge.
On the other hand, advisers’ enforced conversion to a world of Zoom calls and electronic signatures (where available) has accelerated their own digital shifts by several years.
In short, both client and intermediary may well be more inclined to recognise the benefits of a hybrid advice model.
It will take more than a meeting of minds to make such offerings work. There is no shortcut to suitability, and halfway houses often end up satisfying neither party. As others have found out, even if you do have the money to build it, the clients won’t necessarily come.
So this is far from a silver bullet for those advisers who have said they are finding new business much harder to come by amid the pandemic.
Nonetheless, the developments of 2020 will have helped emphasise both the value of advice, and the flexibility with which it can be delivered.
Dan Jones is editor-in-chief of FTAdviser and Financial Adviser
