More young Canadians are investing in securities, and they’re taking a more speculative approach than previous generations, B.C.’s financial regulator says.
A British Columbia Securities Commission survey found that young people are more keen on stock-picking than older Canadians, and that their approach differs from how young people invested even a few years ago.
Investors between 18 and 35 increasingly own individual stocks, and the youngest cohort (those under 25) are more likely to be active traders seeking large returns.
“It’s natural that younger investors, given the long timeline in front of them, would be more inclined to take on more risk,” said BCSC spokesperson Pamela McDonald in a statement. “But today’s younger investors are increasingly willing to take a chance on a particular company.”
Investors under 25 are more confident than older investors about timing the market, the survey found, and more of them say they trade larger amounts for excitement. They’re also more likely to trade at least once a week.
The BCSC found that young investors are less trusting of investment professionals and more likely to seek financial information on YouTube, Instagram, TikTok and other platforms. Less than one-quarter (23%) of young investors work solely with an advisor, compared to 40% of Canadians overall, and about half of young investors manage at least 50% of their investments on their own. They’re also more likely to invest in riskier products such as options, mortgage investments and cryptoassets.
The regulator attributed some of the behaviour to the Covid-19 pandemic, economic conditions, media exposure and new technologies.
The first two years of the pandemic saw a wave of investors open do-it-yourself accounts as markets rebounded from the March 2020 crash, setting off the crypto and meme-stock crazes.
“This research shows young investors are following a different path than generations before,” McDonald said.
Zero-commission trading at online brokerages attracted thousands of new investors over the last couple of years, many of them younger, according to research firm ISS Market Intelligence. An ISS report released Wednesday found that more than half of client accounts at firms offering zero-commission trading are held by investors younger than 35.
ISS also found younger investors have been hurt most by this year’s market downturn. From December 2021 to June 2022, accounts of 25- to 34-year-old investors at online brokerages declined by 24.2% on average, the firm said. That compares to average declines of 22.8% for those aged 35-44; 18.5% for the 45-54 segment; 17.6% for investors under 25; 13.8% for 55- to 64-year-olds; and only 7% for those over 65.
ISS suggested the disproportionate impact on younger investors creates an opportunity for financial advisors.
Wealthsimple began offering zero-commission trading in Canada in 2018, with National Bank Direct Brokerage, Desjardins and Mogo following in 2021.
“While the zero-commission model has the potential to attract a number of new investor cohorts, Canadian online/discount brokerage firms must carefully weigh the offer against the impact of the loss of trading revenue,” said Vince Linsley, associate director at ISS Market Intelligence, in a statement.
“This is particularly noteworthy as they lack the ability to leverage some of the non-trading revenue lines of their U.S. counterparts (such as payment for order flow), or the ability to build subscription or alternative revenue sources.”
The BCSC’s online survey was conducted by Innovative Research Group among a representative sample of 3,789 Canadians (weighted to a representative sample of 2,000) and 1,458 British Columbians (weighted to 1,000) from Sept. 26 to Oct. 5. Online surveys can’t be assigned a margin of error because they don’t randomly sample the population.