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Retail investors are typically non-professional investors who invest their own money in securities, such as ETFs, via brokerage firms or financial advisors.
Rise of the retail investor
Retail investors are growing in number across the ETF market. So let’s find out more about them.
Would it surprise you to discover that
70%
of investors in the Australian ETF market fall into the retail segment?
In fact, since March 2020 retail investment in ETFs has grown by
61.1%
So, what are some of the driving forces behind the rise in retail investment?
Accessibility
Lower fees
Future of Financial Advice (FOFA) forms
How do they invest in ETFs?
Now that we understand the main drivers behind the growth of the retail segment, let’s look at their investment preferences and behaviours.
Over the last few years, we have seenan increase in the number of retail tradingplatforms entering the market. This meaningit’s easier than ever for individuals with littleto no experience to begin their investingjourney
We can see a correlation between the growth of ETFs and recent legislative amendments to FOFA reforms. These changes required advisors to recommend products in the best interests of their customers, instead of the products that yielded the most commission.
Over the last few years, we have seen an increase in the number of retail trading platforms entering the market. This meaning it’s easier than ever for individuals with little to no experience to begin their investing journey.
Some of the largest ETF issuers have reduced their fees recently, making it more appealing for investors to start or further their ETF investment journey.
230%
of retail investors
have an ETF portfolio size of less than $10,000.
When we examine average portfolio value based on investor segments, retail sits in stark contrast to the other investor segments such as Super Funds or Custodians that exhibit a much higher average portfolio value.
1st year
2nd year
3rd year
4th year
5th year
13.5%
19.0%
21.5%
22.7%
23.3%
Over the last few years, we have seen an increase in the number of retail trading platforms entering the market. This meaning it’s easier than ever for individuals with little to no experience to begin their investing journey.
Accessibility
churn within five years
of retail investors
23.3%
Retail investors exhibit the highest churn rate of all investor categories. The next highest churn rate after five years is Super Funds at 6.8%. While many retail investors may share attributes such as age or demographic, each retail investor has a different risk appetite, motivation and time horizon when it comes to investing in ETFs.
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What does the future look like?
We anticipate the Australian ETF market to continue its remarkable growth trajectory. Factors such as product innovation and greater awareness of ETFs in general, are expected to drive AUM to new heights.
Retail investors are expected to play a more prominent role in the ETF market due to ease of trading and lower fees. Improved investor education will assist potential investors to fully understand the risk and benefits of investing in ETFs.
This means that ETF issuers may look to attract new investors through targeted education programs and considered product development. However, the challenge for issuers is to gain meaningful penetration into the retail investor segment, which is not easy given how fragmented these segments are.
To find out how we can help, get in touch today.
That’s where Computershare comes in.
It’s our job to help you better understand your investor base, create meaningful engagement and successfully navigate the nuances of the investor landscape.
© 2024 Computershare Limited. All rights reserved.
Based on data from Computershare’s ETF Intelligence Solution.
Who are retail investors?
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