Long reads

Why are British investors increasingly crossing the pond to trade?

Marco Mottadelli

Marco Mottadelli

Head of Global Brokerage, Fineco Bank

When it comes to their financial portfolios, Britons are looking abroad. Like modern day versions of the proverbial Mrs. Watanabe, market conditions are pushing even relatively modest retail investors beyond their shores. Whereas those Japanese investors were pushed by low yields and inflation at home to seek fortunes in the foreign exchange offerings, post-Brexit Britons are accelerating an already in-progress trend towards trading American companies. Unlike the Japanese, however, this momentum is fueled by both opportunity in the underlying investments and favourable developments in the underlying market infrastructure.

While concrete data is hard to come by, anecdotally we have heard across the market a rise in interest in trading American companies. This comes both from long-time investors and also those caught in the 'retail wave' of the last year. Stuck at home during the pandemic, millions of people decided to take a more active role in the management of their investments. That led to billions of dollars of capital flowing into the market. Some of that went into shares of British companies, and probably neutered some impact of the coronavirus slowdown on the market.

These new investors entered a market far different than if a pandemic happened in 2002 or 2012. Instead of a phone-based trading system and the need to find and build a relationship with an individual broker, starting trading last year was as simple as downloading an app from the iOS or Google Play store. Once onboarded, any trader now has access to powerful technology and tools. This makes it much easier to understand the impact of different decisions on their portfolios, including easy-to-comprehend charts and analysis of market activity. It also gives access to professional-grade tools, including real-time prices for thousands of securities in America and other international markets.

The massive volumes in the market, along with the arrival of so many new traders, has led to a brutal price war on commissions. Commission-free shares trades have profilterated for American buyers, and even traders geographically located elsewhere can take advantage of lower prices. Lower fixed or percentage commissions are sweeping the market. There’s also scattered free offerings to entice traders – for example at Fineco offer commission-free CFDs on American exchanges. The overall impact is share trading with very low cost.

Today’s brokers are also providing a suite of services that smooth some of the more vexing parts of trading in another country. This includes ample educational services to help traders understand the difference between ETF and share investing, and the functions of more advanced processes such as trading in futures and options. There’s also much more flexibility in creating a workstation that is completely customised to the needs of the trader, along with support to trade across any web-enabled device.

All eyes are on volume figures for the first few months of this year as the world hopefully heads slowly out of lockdown and towards the 'new normal.' So far preliminary figures show that the gains of last year are not being erased – the people who entered the market are finding a reason to say. We believe this means we’ll continue to see a proportionate increase in the British trading American shares, meaning the post-Brexit share market in this country is significantly more Trans-Atlantic in its nature and approach.

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