🎧The CEO of IG Group talks about the future of retail investing
How retail traders are getting smarter
Hi! It’s George from Investorama, your guide to the future of investing - without the hype.
This week I’m sharing some highlights from my conversation with June Felix, the CEO of IG Group, the giant retail trading platform.
⚠️ When I started this podcast series about the future of investing, I wasn’t expecting to have the CEO of IG Group as a guest.
IG is a key player, but it is known for spread betting and contracts for difference (CFDs). They are “high-risk activities and are not suitable for everyone”. In fact, I wouldn’t recommend them to anyone. There’s a reminder on IG’s website that “75% of retail CFD accounts lose money” (something we discussed with June Felix).
The PR team of IG approached me, and although it’s cool to interview i) a CEO of a listed company, ii) about a topic I care deeply about: financial literacy, I hesitated.
I didn’t want to use my little influence to greenwash the true nature of spread betting or even just trading instead of investing.
But, if I want to talk about the future of investing, I can’t just use the narrow frame of my perspective. I’m all about long-term investing, but financial markets are also about short-term trading.
Ultimately, I thoroughly enjoyed this conversation full of insights about the evolution of retail trading. Overall, I left with a positive outlook on the future of investing. I would even go as far as to say we could be reaching an “Age of Enlightenment” for retail investors, where the tools, the knowledge, and the data become widely accessible to unlock financial futures - although there is still a lot of work to do!
Listen or Watch
Read on to find some highlights of our conversation. Or you can listen to the episode on every podcast platform or watch it on YouTube.
Three Quotes
“IG’s web traffic, the YouTube views have increased substantially over this past year, despite markets being rather depressed in terms of equity markets in general. The retail clients want to understand what's going on. This is a global trend that we see across our clients everywhere.”
This was a surprise to me (and activity is down as expected). There’s a stereotypical view that “retail” traders go into a frenzy when stonks go up and then walk away until the next bubble. It’s roughly what happened in the dot com bubble, but this time is different. I think investing is becoming a more important part of our lives.
“Defined contribution is a wave that is going to sweep the world and has certainly already started in many parts of the world like the US or Asia. And it will be necessary in Europe as well because defined benefit programs are not sustainable.”
The shift in trading and investing is not happening in a vacuum. I also discussed this with CAIA’s CEO, Bill Kelly. We now HAVE to deal with our longevity risk. That’s also why I prefer the term DIY investors to retail investors: Retail is a category, DIY a methodology.
"Based on a recent survey of our customers: 82% believe that they can find opportunities even in market downturns and in challenging markets because they have over time developed the confidence and tools understanding to participate in the market in the right way.”
I can offer two thoughts on that.
The first one is pessimistic. It’s the overconfidence bias. Just like we all think we are above-average drivers, we think we are above-average investors. Remember that Warren Buffett recommends a low-cost S&P 500 index fund for most investors?
The second one is that we’ve moved past overtrading (see the first quote), and DIY investors are finding the “right way”
Women Investing & Inclusivity
I asked June about the gender gap in investing. Fewer women take part in the financial market, and that hurts women's total wealth over time. But for June this seems to be a rather European problem.
In countries where they have already moved to a large extent to defined contribution systems, people have had to participate in markets in order to ensure that they don't get left behind.
And that's certainly in Asia or in the US, where there is less defined benefit. Investors [men and women] are very hungry to learn and be engaged. And I do see that the trend for women to trade, going forward, is partly due to role models, right? giving them the tools to have confidence to trade effectively.
Next week: a Deep Dive into Real Estate, REITs & BREIT