Armchair investors flock to booming market
Switzerland is catching up with a growing number of hobby traders who play the stock markets online without seeking professional advice.
Last year the online trading system, Swissquote, saw client numbers soar 31 per cent to 64,067. Asset volume grew 50 per cent to SFr4.5 billion ($3.63 billion), including SFr1 billion of new money.
There are currently about 130,000 Swiss, or two per cent of the population, trading independently online according to Swissquote. And chief executive Marc Bürki expects this number to rise to 400,000 in the next few years.
Bürki estimates that four million Germans (five per cent of the population) now use the internet to trade, a figure exceeding by the largest US company E-Trade.
“Switzerland has an extremely developed equity culture with about 20 per cent of people holding shares, which is higher than Germany or France,” Bürki told swissinfo.
“But everything is slower in Switzerland because banking standards are much higher and loyalty is extremely high. Before people take the step of moving their assets they will thoroughly examine and benchmark rival services.”
Bürki puts the rise in new clients down to the lower transaction fees on Swissquote, some disillusionment with the traditional banking sector and the recent surge in share prices.
Even Bürki was surprised when clients with multi-million franc assets started knocking on the door. Swissquote is developing its high net worth client (SFr200,000 or more) wealth management service.
“Some of them were disappointed with the services and returns, but it is also the fun of managing their assets themselves. Some transfer a portion of their assets to us and challenge their bank advisors to do better than them,” he said.
A recent study by the Swiss Banking Institute at the University of Zurich found that 49 per cent of people surveyed took investment decisions without any advice and a further 17 per cent consulted only with friends and family before risking their money.
But Bürki insists that the overwhelming number of his clients know what they are doing.
“They are hobby traders but they do it in a professional manner by keeping themselves informed and reading up on their investments. They actively manage their portfolios and they are not gamblers,” he said.
“When we started nearly all of our clients were casino-type gamblers. They do not have a strategy but trade from gut instinct. We still have them [a few hundred] but they have been diluted by all the others.”
Professor Manuel Ammann, director of St Gallen University’s Institute of Banking and Finance, has reservations about the numbers of internet hobby traders trying to cash in on a booming market.
Responsibility
“It is a common trend to see trading increasing as prices increase, but this is not the best thing to do. Rather than creating money, it could destroy it,” he told swissinfo.
“We saw a similar development in online brokerages in the late 1990s, but when the market crashed [2000-2002] people ran into trouble. Very few people have the gift of predictions that can add value – even professional traders.”
Swissquote does not advise what shares to buy or sell, but it does filter relevant market information to its clients and offer risk assessments.
“The tool will alert them about changes in volatility or if they have made losses, and we guarantee that systems are working,” Bürki said.
“But our responsibility does not go beyond this point. If someone makes losses because they decided to trade in a particular stock then it is their responsibility.”
swissinfo, Matthew Allen in Zurich
Swissquote 2006 results:
Net profit up 149% to SFr36.5 million.
Client numbers up 31% to 64,067.
Client assets up 50% to SFr4.5 billion.
New funds amounted to SFr1 billion.
Swissquote expects new funds to reach at least SFr1 billion in 2007 and client numbers to reach 80,000.
Swissquote was listed on the Swiss stock exchange in May 2000. Its headquarters are in Gland, canton Vaud, together with an office in Zurich.
The online bank has a market share of over 50% of online retail trading clients in Switzerland.
The online trading service has access to many of the world’s leading stock exchanges (barring Asia) and has linked up with financial companies offering investment funds.
The typical retail client at Swissquote is male, 42 years old, with an above average education and with a good understanding of the internet. Some 90% are Swiss, broken down to 70% Swiss-German, 25% Swiss-French and 5% Swiss-Italian. The average deposit is SFr75,000 spread amongst bonds, funds, and cash.
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