Only 42% of investors who own shares directly do so through a brokerage firm, a huge drop from 59% just two years ago. That finding comes from the Canadian Shareowners Study, sponsored by the TSX Group.

The study is discussed in the October edition of Wealth Watch, published by the Investment Dealers Association of Canada.

According to the study, “Shareowners are more likely to hold their stocks or stock based funds at a bank or trust company than a brokerage firm or mutual fund company.” The report notes that the “mass market” investor that is believed to be shifting out of the brokerage firm, while more sophisticated investors continue to rely on brokerages.

Of the 801 shareowners in the study who reported using a brokerage account, 77% reported dealing with a full service firm. However, only 45% of these shareowners reporting dealing with a bank-owned brokerage firm, compared to 50% who reported dealing with an independent firm (the remaining 5% didn’t respond). “This indicates that independent and regional firms are proving to be formidable competitors and are doing a good job at attracting clients and assets,” the study notes.

The study also found online trading is growing in popularity, with 35% of shareowners reported placing trades online in 2004, compared to 27% in 2000. :The popularity of on-line trading is also however reflective of changing attitudes among certain investors. Sophisticated investors want to experience all available types of relationships the industry has to offer; advisory, discretionary, and let alone. It is only by experiencing each relationship that the investor can perhaps feel comfortable in establishing a preference,” the report suggests.

Among the the study’s other findings:

  • lack of money is still the biggest barrier to investing for non-shareowners; one in five investors who bought stock in the past 12 months indicated that over 30% of their stock buying was in income trusts;
  • the most common reasons for selling stock in the last year were to make alternative investments or to realize capital gains, only 6% sold stocks for the purpose of incurring a capital loss;
  • one in five investors holds a U.S. dollar trading account; and
  • just over one-quarter of all share owners think current market volatility will continue for the next year, while one-third believe that the market will rise.



The study also reports that mutual fund holdings, as a percentage of portfolio size, have been on a gradual decline. Additionally, fewer shareowners reported holding mutual funds in 2004 (81%) compared to 2000 (87%).

In contrast, direct stock ownership has seen an upward trend with 57% of shareowners surveyed holding stocks directly compared to 51% in 2000. “Overall poor performance, new competing products, a more cost conscious investor, and an abundance of negative media headlines, have made many investors shy away from conventional mutual funds,” the report says.

“A common trend revealed in the study underlying both fund and stock ownership is that investors are increasing the average number of stocks and funds held. This may be indicating that investors are taking a more cautious approach to investing and going to greater lengths to diversify their portfolios,” it also reports.

The average portfolio was valued at $120,000 in 2004, with 25% of shareowners reporting to have a portfolio in excess of $100,000.