From the Australian Financial Review, August 29, 2007:
By Renai LeMay
CommSec general manager Matt Comyn is in no doubt as to just how comfortable some of his retail customers are with technology.
"I think there was one guy that had about 11 computer monitors, varying sizes, from huge TV-style screens to normal 17-21 inch, and also live-streaming CNBC, Bloomberg," he said.
"It was a full-blown trading room for one person."
Comyn tells stories of home-based investors that have multiple redundant internet connections to make sure they're online 24x7, and of customers demanding speeds in the hundredths of seconds for an online broker to get an order onto the market.
The executive and others in the finance industry are watching with fascination as small investors bring more and more technology to bear in an effort to stay ahead of the pack. It's not just the traditional charting and technical analysis desktop applications such as MetaStock that have been used for more than a decade.
Investors are quickly supplementing these tools with a new wave of technologies that are much more flexible and interactive.
For example, mobile phone carrier Hutchison is experiencing rapidly growing use of the finance channel on its third-generation (3G) mobile network.
The service allows investors to track their share portfolios, get quotes, create performance charts and keep on top of currency movements, all from their mobile phone. In 2006, the company's Australian customers used the service about 4 million times, up from 1.4 million in 2005.
Comyn and his counterpart at Australia and New Zealand Banking Group's online broker E*Trade, managing director John Daley, say there has never been enough local demand for a full mobile-trading platform, although both brokers are keeping an eye on the situation.
Part of the problem is mobile phones have never had big enough screens to accommodate the quantities of data that investors need to make decisions.
But mobile phones with large screens and full web-browser capabilities, such as Apple's iPhone, which launched in late June, could change this situation, especially when coupled with Australia's new 3G networks that provide faster data speeds than they did just a few years ago.
Large financial institutions such as Bank of America have already created customised websites for the iPhone and it isn't too difficult to imagine local banks and online brokers following suit when the device launches in Australia some time in 2008.
There's also an international precedent. In early technology-adopting countries such as Japan, millions of traders already make mobile trades daily through major online brokers, even including the Japanese arm of E*Trade (not owned by ANZ). Other countries have been slow to follow, but the Hutchison example shows there is a growing level of interest.
Some Australian online brokers have already extended their email alerts functionality to deliver price changes or corporate announcement alerts by SMS to clients' phones - for a price.
The old technical analysis applications are also rapidly giving way to internet equivalents. Sites such as stockscan.com.au don't even require investors to be in front of their computer to monitor the market for trading conditions and stocks that meet their criteria.
John Christian, who runs stockscan.com.au from Brisbane, said his site operated on a "set and forget" mentality. Users can simply input their scanning criteria and walk away. The service will automatically email them when companies match their settings.
Mr Christian said the system solved the problem of human error - investors missing out on opportunities because they forgot to run scans of the market or were away from their computer.
Another local example is ShareFilter.com, while internationally Yahoo! Finance provides free technical analysis functionality.
Other sites such as locally-developed NewsAlerts.com.au (launched last year) take the pain out of monitoring news about listed companies.
NewsAlerts is a free service, where users input a list of stock tickers they are interested in. The service instantly emails them every time that company makes an announcement on the Australian Stock Exchange, or is mentioned in a press article.
It's similar to some of the features found on broking sites such as E*Trade, but is free due to an ad-supported model.
Another, more mainstream service that can deliver email alerts based on keywords is Google News, which aggregates news from publishers all around the world.
While a lot of online services still require a per-use or subscription fee, many basic services are increasingly available free.
Online stock-charting packages are going this way. Offerings such as Google Finance, Yahoo! Finance and BigCharts.com lead the way in providing basic charting functionality.
Mr Comyn said although it cost online brokers a lot to develop and offer tools such as charting applications, they were increasingly being provided as a value-added service rather than for a fee.
"If you look at a free charting package, five years ago you'd get some basic indicators," he said. "Now you can plot multiple stocks; you've probably got 30 or 50 different charting indicators. And all that sort of thing is free."
The way investors communicate with each other is also changing due to technology. Tech-savvy shareholders have long been familiar with online discussion forums such as HotCopper, Sharescene and Topstocks.com.au. But now social networking tools such as Facebook and MySpace are gathering converts.
"We're puzzled," said a cohort of small Yahoo! shareholders who have organised themselves via an international "group" on Facebook. "In the last three years, Google's shareholders have seen their holdings rise 333 per cent. Yahoo!'s shareholders have seen their holdings drop 8 per cent."
The group, which claims to collectively own $US60 million ($75.2 million) in Yahoo! stock, is using Facebook and other Web 2.0-style technologies such as blogs, wikis and YouTube to push Yahoo!'s management into changing its strategy.
The mastermind behind the push is Eric Jackson, the chief executive of Jackson Leadership Systems, a US-based strategy and governance firm. Dr Jackson told The Australian Financial Review he had used online social networking tools for shareholder pushes against companies such as Yahoo! and Motorola because the medium was cheap and effective.
"I spent something like $US2500 on the Yahoo! campaign and probably zero in hard costs for the Motorola campaign so far," he said. "Yet, the internet allows anyone to put their ideas out there and sink or swim."
In Australia, local telecommunications companies have long known that many of their shareholders use social forums such as Whirlpool.net.au to discuss their services and share prices. The forum has earned itself a nickname among Australia's telco community: Whingepool.
But such is the power of the crowd that the management of telecommunications carriers such as iiNet and Internode regularly read and contribute to Whirlpool. It's not a rare event to find iiNet chief executive Michael Malone online, or Internode managing director Simon Hackett.
Online brokers are reluctant to integrate social networking tools into their systems, due to the problem of identifying participants who may have self-serving aims in posting comments. For example, bulletin boards such as HotCopper are renown in Australia for anonymous posts by traders trying to ramp up stock prices.
"From our perspective, it's something that we're thinking about, but I don't think we've really worked out that model," Mr Comyn said. "We haven't seen any real leadership in financial services on social computing more broadly but it's something we're thinking about."
One of the next big technologies to affect investors may be the advent of online video. Technology companies such as Telstra have started putting streaming video of their annual meetings online and others are expected to follow. Online brokers expect to start adding video feeds into their existing pools of research available to investors.
One thing is sure about the future of technology in investing. Not even the experts can really know what the future will look like, even in the next few years.
"It's very hard to know, " Mr Daley said when asked what his site will look like in the future. "I can tell you that the site of the future will be more sophisticated and at the same time easier to use, but exactly how, it's quite hard to know."
Monday, September 10, 2007
From the Australian Financial Review, August 29, 2007: