How the pandemic has spurred online investors

With record numbers of new clients and trading volumes, BMO's digital investing unit is aiming for new heights

How the pandemic has spurred online investors

The past few weeks have been a trying time for Canadians: as the coronavirus ripped across the world, measures to contain its spread caused a devastating domino effect that saw businesses shut down and workers laid off.

But even as the real economy has ground to a virtual halt, there are spaces that have become decidedly more active. That includes BMO’s InvestorLine platform, where recent happenings in the financial markets have apparently spurred an uptick in digital investing.

“The spike in adoption of digital investing has been absolutely incredible.” said Silvio Stroescu, president of BMO InvestorLine. “Amongst the inevitable noise of the market volatility, there are many signals which lead us to believe this surge in digital investing is more than just a one-time event. I believe this is an inflection in the adoption curve for digital investing going forward.”

Seizing long-term opportunities
According to Stroescu, the digital investing platform’s new client growth in March was more than triple the figure observed during the same period last year. Meanwhile, inflows into the digital solutions, including adviceDirect and SmartFolio, were up 40% year over year.          

“There’s definitely more activity as well,” he added, noting a year-on-year tripling in trading volume observed last month. April is also shaping up to be a period of increased use, with more than double the trading volume observed so far this month compared to the same period last year.

If things had played out similarly to the 2008 crisis, recent volatility and drawdowns in the equity markets should have led to more panic-selling behaviour. However, Stroescu said that their granular trading volume data suggests something different. Buying activity on the platform consists of roughly 55% of all trades by orders; over the past few weeks, it has fluctuated between 52% and 65%.

“That’s partly been driven by the fact that we’re seeing more clients under the age of 35 adopting our digital platforms,” he said. “Their activity is more indexed toward buy orders, while baby boomer activity is pretty much split down the middle between buys and sells.”

The emerging picture, then, is one of people seizing on long-term opportunities rather than making uninformed, emotional decisions. To Stroescu, this points to the fact that investors are both willing and able to consume more information than ever, which enables them to make smarter decisions and stay true to their goals.

“Education on smart investing principles has become more prominent over the years and has arguably landed better as more and more people digest information digitally,” he said. “I think overall, we have a more educated and emotionally resilient investor compared to when the last big market shock happened.”

Helping investors find their North Star
The intervening years have also brought great leaps in the tools offered by digital advice platforms, and that includes BMO. Aside from the Portfolio Optimizer tool that lets investors know when they should rebalance their portfolios, users can rely on the adviceDirect tool for notifications on when they may need to correct their asset allocations, as well as for specific guidance on how to properly diversify their holdings.

“We’ve had four consecutive quarters of record-breaking growth in adoption of adviceDirect. More investors select the adviceDirect digital service and subsequently choose to consolidate their investable assets from other traditional brokerages and self-directed platforms,” Stroescu said.

A key test of resilience to all digital investing platforms is accessibility — something Stroescu said has long been a priority at BMO. “We‘ve expanded the capacity of our digital platforms deliberately for the past two years, essentially doubling the number of concurrent users who can log in at the same time,” he said. “On March 9th, we experienced a record in daily trading volumes, as well as the numbers of concurrent users on our investing platforms. Despite the exponential increase in demand, we were still well below 70% of our capacity, with ample opportunity to flex up if needed.”

Aside from offering specific guidance and validation at scale through its digital tools, BMO gives clients the chance to speak with advisors who can keep them grounded and help them tease apart the noise in the markets from the signals they should be paying attention to.

One area that still needs improvement, according to Stroescu, was the elasticity of the contact centres. Wait times reached a peak during the week of March 9 — exceeding an hour in certain cases — as the increase in trading activity and new accounts contributed to an imminent and exponential surge in call volumes.

“We activated our regional sales teams as well as contact centre talent with operational roles by training and empowering them to respond to inbound calls from our clients,” Stroescu said. “We were also fortunate to get tremendous support from the regulators with express registrations and parameters for remote access; now more than two thirds of our contact agents are able to work from home and be available for our clients.”

Aside from improving accessibility, the platform is looking at ways to do even better at providing personal advice. As more investors will be expecting investment advice at scale, BMO is expanding capabilities through machine learning, analytics, and personalization features of its digital tools, as well as the quality and intellectual capital of their phone-based advisors.

“When we talk to humans who are experts in their fields, we expect to get value which extends above and beyond what can be commoditized through digital tools,” Stroescu said. “So we continue to deepen the expertise of our human talent which complements the digital experience, evolving the quality of investment a`dvice we deliver on both rational and behavioural fronts.”