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22-215MR ASIC releases research about investment behaviour
ASIC has released Report 735 Retail investor research (REP 735) capturing retail investor motivations, attitudes and behaviours in the period following the onset of the COVID-19 pandemic.
The research surveyed 1,053 Australian retail investors aged 18 and over who had directly traded in securities, derivatives or cryptocurrencies at least once since March 2020. Conducted in November 2021, the survey results provide a point-in-time snapshot of investor behaviour during a period of increased activity in retail markets, supplementing existing market data and research conducted in Australia and overseas.
Despite changes to economic conditions since the research was conducted, retail market activity has generally remained elevated this year compared to pre-pandemic levels.
ASIC Chair Joe Longo said, ‘With so many new investors active in financial markets, the research builds on our understanding of retail investors and helps us consider where our regulatory efforts are warranted.’
‘The growth in retail markets since COVID-19 has fuelled changes to the mix of product types being traded. The research also confirms the prominence of digital and social channels as sources of information for investors, and the diversity in trading platforms they use’, he said.
Retail interest in crypto-assets
Of the 1,053 retail investors surveyed, 44% reported holding cryptocurrency, making it the second most common product type held after Australian shares at 73%. A quarter of surveyed investors who held cryptocurrency indicated that cryptocurrency was the only investment they held.
The research also showed that, after bank trading platforms (used by 31% of surveyed investors), the three most commonly used platforms all specialised in cryptocurrency.
Mr Longo said, ‘We are concerned about the number of people surveyed who reported investing in unregulated, volatile crypto-asset products. This research does highlight during this particular point in time, the appeal of crypto-assets to the market. According to the survey, only 20% of cryptocurrency owners considered their investment approach to be ‘risk-taking’, raising concerns that investors did not understand the risks of this asset class.’
‘ASIC is also concerned that there are limited protections for crypto-asset investments given they have become increasingly mainstream and are heavily advertised and promoted. There is a strong case for regulation of crypto-assets to better protect investors.’
Digitalisation and socialisation of trading
The research shows that investors are using a range of online trading platforms that offer easy access to a range of products. Many investors are also using digital channels and social media platforms to source information on investing. Since March 2020:
- 34% of surveyed investors reported sourcing information from Google searches
- 41% of surveyed investors reported sourcing information from social media and networking platforms, including YouTube (20%), Facebook (11%), podcasts (10%), and financial influencers (10%).
With more than half (51%) of new investors aged between 18 to 34 years old, Mr Longo said, ‘It’s encouraging to see more people, particularly younger investors, engaging in the market. A third of all surveyed investors said they are ‘in it for the long-term’. However, half of those surveyed admitted they have invested in things because they didn't want to miss out. This, coupled with more complex and opaque financial product and service offerings, and the speed and reach of marketing and distribution through digital channels, may expose investors to new risks or higher levels of existing risks.
‘ASIC is working to better understand the use of digital engagement practices and maintain regulatory pace with these developments. Risk is part of the investment process, but entities need to operate fairly and avoid the use of features that can harm investors’ said Mr Longo.
The research has been informing our work in the retail sector, including changing practices in retail product design and distribution, investor protection strategies and crypto-assets.
REP 735 was prepared by SEC Newgate in close consultation with ASIC. The research used a mixed method approach involving a preliminary qualitative research phase (conducted in August 2021) followed by a nationally representative online survey (conducted in November 2021).