UK platforms see uplift after shorted stocks frenzy

Investment platforms in the UK have seen a surge in new business from younger investors, following the rush by retail investors to target shorted stocks.

In the past fortnight, day traders on social media platforms such as Reddit piled into a number of beleaguered US stocks including video game retailer GameStop, driving up some prices more than 400 per cent.

Investment platforms in the UK said the episode had delivered a boost to the number of retail investors signing up to their services, reinforcing a record intake of new joiners in 2020.

Interactive Investor reported a surge of nearly 1,200 per cent in the number of women under the age of 24 opening accounts on the platform in the final two weeks of January, and a 1,388 per cent rise in the number of men under 24 — compared with the same two-week period in January 2020.

Total growth across all age groups was 368 per cent compared with the same period a year earlier, the platform said.

Myron Jobson, personal finance campaigner at Interactive Investor, said: “The Reddit traders versus Wall Street saga appears to have unwittingly fuelled the trend of young adults finally taking the plunge to open an investment account for the first time during the pandemic — with people having more time for financial admin.”

Growth in the number of credit card payments to retail brokerages doubled in 2020, according to a report from Barclays. It is now 300 per cent higher — and the rise has been steepest in the youngest cohort of investors, rising by up to 400 per cent among 18-29 year olds.

FreeTrade, a low-fee UK brokerage, added 150,000 new customers in January alone — expanding its base by more than 40 per cent. This included one day last week when it added over 40,000, more than 40 times its daily average.

Of this 2021 cohort, 80 per cent are under the age of 35, it said. Many of the customers picked up popular stocks that have dominated discussions in Reddit forums in recent weeks, such as GameStop and AMC.

“The worry is new investors cherry pick investments based on what they’ve heard, without doing their own research or considering their attitude to risk and investment time horizon,” said Jobson. “Platforms have a duty of care to help first-time investors.”

Traditional brokerages are also seeing an uplift from younger traders. AJ Bell, a UK investment platform, declined to provide specific numbers on account growth, but saw “a noticeable increase in new account openings last week”.

While noting that the end of the tax year was always a busier time, it said the increase in new dealings suggested that “a proportion of new accounts were focused on the Reddit-fuelled trading surge”, adding that one-third of the new customers were under 30.

Hargreaves Lansdown, the UK’s largest investment brokerage, reported a 40 per cent jump in net new money transferred to the platform in 2020, and an additional 84,000 new customers in the second half of the year.

This growth was largely driven by younger investors. The average age of a new customer was 37. In 2012, the average age of a Hargreaves customer was 54. It said the past few weeks had been “very busy”.