Despite slipping in the latest online broker ratings, Commonwealth Bank’s market-leading online brokerage CommSec has increased its market share.
Canstar updated its online share trading star ratings this month, with CommSec conspicuous for having no five-star ratings in any of the three categories. It had been a strong performer in the Canstar survey for many years.
But at the same time, Investment Trends reports that CommSec has been a beneficiary of the recent surge in the number of online brokerage customers, increasing its market share from 52 per cent to 54 per cent over the past two years.
Canstar rates online brokerages according to three user profiles – casual, active and trader. Brokerages with five-star (outstanding value) ratings include CMC Markets, IG Markets, Interactive Brokers Australia, Saxo Capital Markets, nabtrade and Amscot.
Canstar’s group executive for ratings and financial markets, Steve Mickenbecker, said these brokers have tended to follow a pattern where they enter the market as a low-cost provider and then build up their product features and services over time.
Mickenbecker said: “CommSec’s proposition has not diminished but the others have come through and some are continuously improving. That is especially true of CMC.”
CommSec is a relatively high costs online broker. Mickenbecker said this may not be an important factor for investors, depending on the amount of trading they do.
He said one thing that keeps investors loyal to CommSec is the integration with its banking platform.
Investment Trends research director Recep Peker said the number of active online traders went through a growth spurt in 2018 and 2019. At the end of 2017 Investment Trends estimated that there were 645,000 active users of online brokerage services and that number had remained steady for a number of years.
By the end of last year that number had grown 16.3 per cent to 750,000. CommSec’s market share grew from 52 per cent to 54 per cent over that period.
Peker said a lot of CommSec’s success was due to its launch last year of Pocket, an app that facilitates very low minimum investments. The minimum investment in an exchange traded fund is A$50, compared with a minimum investment of $500 in a listed security using the standard CommSec offering.
Pocket users can choose from seven ETF themes. They include an “Aussie Top 200”, an emerging markets ETF, a global healthcare companies ETF, global 100, sustainability leaders, “Aussie dividends” that pay above-average returns and a “tech savvy” which includes the top 100 tech and non-financial NASDAQ companies.
Peker said: “The other thing about CommSec is that it always rates very well from a client satisfaction point of view, especially on mobile.
“There have been some reliability issues with some of the smaller brands as their numbers have grown. CommSec does not have those problems.”