Looking Back: The Evolution of Trading

by on Nov 17, 2017

It is frustrating to call your broker, be ready to make a trade, and find out that they are on vacation.

-Corporate Insight Account Holder, 1996

The process of placing a trade has changed significantly since Corporate Insight launched its first Broker Monitor report in 1996. While individual investors could place trades electronically 30 years ago, online trading did not become a common practice until the late 1990s. Instead, investors relied on brokers to gather security recommendations and place trades. This process lacked efficiency as some brokers were slow to pick up the phone and others made trading mistakes, leaving clients sometimes unable to purchase securities at the intended price.

We don’t let our clients make trades. That defeats the purpose of hiring me.

-Edward Jones Advisor, 2017

By 1998, most discount brokerages launched online trading platforms, providing clients with the option to research securities and place trades independently. While some full-service firms, such as UBS, followed suit a few years later, many were reluctant to provide clients with the option to place trades on their own. Today, most full-service brokerages offer trading but encourage clients to contact their financial advisors frequently. Edward Jones, Raymond James and RBC Wealth Management remain the only firms in our coverage group not to offer trading services on their digital platforms.

Aside from the speed and convenience, digitizing trading has allowed brokerages to reduce the prices of trading. Over the past few years, the influx of digital advice platforms has taken the industry by storm, undoubtedly increasing the pressure on incumbent brokerage firms to lower their commissions even further. The beginning of 2017 marked a significant reduction of online equity trade prices. Moving forward, we expect incumbent brokerages steadily to reduce prices to keep pace with their competitors and to retain customers.

The trading interfaces themselves have also seen drastic changes since their initial launch. Trade tickets now typically display relevant account information and offer helpful tools, such as symbol lookup and share calculators, to simplify the trading process and make it more accessible to the average investor. Firms, however, are riding the tides of change at different paces, and Corporate Insight will continue to monitor their progress. To celebrate Corporate Insight’s 25th year, we consider the evolution of the financial services industry in four slide decks: communication and customer service, trading methods, website design, and account security. In the second installment, available now, we look back at how the online trading experience has evolved since it disrupted the brokerage space in the 1990s.

Download Now