Online interactions between investors and their primary discount brokerage firms have increased in both frequency and importance as more Generation X and Y consumers become self-directed investors, according to a study released Wednesday by J.D. Power and Associates.

In 2010, the average age of investors who use discount brokerage firms is 45 years old, compared to an average of 50 years old in 2009. In addition, 40% of self-directed investors in 2010 fall within Generations X and Y (ages 18 to 39), compared with 26% in 2009.

“This change in discount brokerage investor demographic profile coincides with an increase in the proportion of online interactions between self-directed investors and their primary firms in 2010, as well as an increase in the importance of the online channel as a driver of overall satisfaction,” says Lubo Li, senior director and financial services practice leader at J.D. Power and Associates in Canada.

“Online and mobile transaction options are likely to become an increasingly important component of investors’ overall experience, since discount brokerage investors will become even more technology-savvy in the future,” he adds.

The Canadian Discount Brokerage Investor Satisfaction Study, now in its second year, examines investor satisfaction with their primary discount brokerage firm by measuring six key factors. In order of importance, they are: interaction; account information/statements; trading charges and fees; account offerings; information resources; and problem resolution. Overall satisfaction averages 707 on a 1,000-point scale in 2010, improving by 10 points from 2009.

The 2010 study includes responses from 2,835 investors who use investment services with discount brokerage firms in Canada. The study was fielded in May 2010.

Disnat ranks highest in investor satisfaction

Disnat ranks highest in discount brokerage investor satisfaction for a second consecutive year with a score of 725. Disnat performs particularly well in three of six factors: interaction, account information/statements, and account offering. BMO Investorline improves more than any other firm in 2010, compared with 2009, to rank second with a score of 720. BMO Investorline performs particularly well in the information resources factor. National Bank Direct Brokerage ranks third with a score of 716.

New account growth slows

While Gen X and Y investors are increasing their online trading volumes, overall new account growth in the discount brokerage investor market has slowed considerably in 2010 following rapid growth the year before. In 2010, only 14% of discount brokerage investors report opening a new account within the past two years, compared with 31% in the 2009.

“As market growth slows and acquisition of new investors becomes more challenging, focusing on providing a highly satisfying investor experience is critical for discount brokerage firms,” says Li.

“Although costs and fees are key to client acquisition and retention, we have yet to see the industry take major action to simplify fee structures and lower trading charges, similar to what has happened in the U.S. discount brokerage market during the past two years. Firms that break the mold with innovative offerings and competitive rates may be able to differentiate themselves from the competition and build stronger momentum for future growth,” Li concludes

IE