There has been a surge in the number of investors opening an online brokerage account during the recent lockdown period. But investors making their own trades should ensure they are getting good value with their online broker.
Comparison site Canstar has updated its ratings for online share trading and CMC Markets comes out on top for the 10th year.
It rated 42 share trading platforms from 20 providers, assessing them against three consumer profiles – casual investor, active investor and trader. CMC Markets has the top performing products across the profiles.
Other brokers that performed well include IG Markets, Interactive Brokers Australia and nabtrade.
Interestingly, Australia’s largest online broker, CommSec, rated lower amongst most categories.
Steve Mickenbecker, group executive financial services at Canstar, says initially CommSec rated higher when it was established, as it had the best-featured product.
“Since then those that were originally cheaper have caught up. CMC Markets is the best example as it has continuously improved its offering and is a well-featured product,” Mickenbecker says.
Despite this, incumbency matters, as the investors’ histories are there, and they may not be willing to seek out a better deal due to convenience.
Mickenbecker says: “CommSec has completely integrated its platform to NetBank so it’s a nice one-stop-shop to look at finances across the board and makes it easier to transact.”
This comes as the Australian Securities and Investments Commission (ASIC) report: Retail investor trading during COVID-19 volatility, revealed that over 140,000 new investors signed up to brokers between 24 February and 3 April.
This was an average of 4,675 new accounts a day, representing around 21 per cent of all active accounts and is around 3.4 times higher than the last six-month period.
In addition, accounts that had not traded in the previous six months started trading again.
ASIC says: “A total of 142,022 ‘dormant’ retail broker client identifiers did not trade during the benchmark period, but recommenced trading during the focus period.”
Canstar Research said CMC Markets managed to remain on top due to its strong combination of competitive pricing and extensive feature offerings.
Canstar categorises a casual investor as someone who trades once a month on average, using a long-term strategy. They values ease of use, competitive costs and access to educational resources.
The online brokers that rated five stars for value in this category are CMC Markets Share Trading Classic, Interactive Brokers Australia Share Trading and nabtrade.
CommSec Share Trades Internet Preferred received a four-star rating for this category and CommSecIRESS received a two-star rating.
Mickenbecker says: “It is important to note that casual investors that make a few trades a year do not need to pay for the Rolls-Royce of trading products.”
An active investor is someone who makes an average of four trades a month and may be interested in investing in managed funds. They value research tools and competitive costs.
The five-star ratings were awarded to CMC Markets Share Trading Classic, IG Markets Share Trading, Interactive Brokers Australia Share Trading, nabtrade and Saxo Markets SaxoTrader Pro/Go.
In this category, CommSec’s Share Trades Internet Preferred rated three stars and CommSecIRESS was awarded two stars.
A trader is someone who makes an average of 30 trades per month and values access to real-time data, prefers a dynamic trading platform and availability to derivatives.
The brokers that received five-stars include Amscot valueRate webIRESS, CMC Markets Share Trading in the Active Investor, Classic and Premium trader options, IG Markets Share Trading and Interactive Brokers Australia Share Trading.
CommSecIRESS was awarded a three-star rating in this category.
CMC Markets’ Classic tier investors pay the greater of $11 or 0.10 per cent per trade, Active Investor tier pays the greater of $9.90 or 0.10 per cent per trade, and Premium Trader tier investors pay the greater of $9.90 or 0.075 per cent.
For investors that have a Commonwealth Direct Investment Account, the brokerage fee starts at $10 and goes up to $29.95 or 0.12 per cent over $25,000. For investors using a bank of their choice, the brokerage fee is $29.95 up to $9,999.99 and 0.31 per cent for $10,000 and above.
Canstar assigned each of the profiles a weighting of price and features based on consumer behaviour.
“The casual investor and active investor profiles use a 50/50 split, whereas the trader profile uses a 60/40 split for price and features respectively.”
ASIC notes that retail investors have been trading more frequently with the average daily securities market turnover by retail brokers increased from $1.6 billion to $3.3 billion between 24 February and 3 April.