Investors plough savings into the market to dodge rock-bottom rates

While the pandemic has wreaked havoc on vast swathes of British business, trading firms are in the pink.

Households are estimated to have built up around £100billion of extra cash in lockdown as spending on everything from travel to meals out evaporated.

Many of these ‘accidental savers’ have looked for ways to put this money to work – and with interest rates at record lows, the volatile world of the financial markets has become a tempting alternative.

This week, an update from online trading firm IG Group showed how it has benefited.

Its number of active clients has rocketed from 133,800 to 207,000 over the last year, and its trading revenue was up 66 per cent to £416million in the six months to November.

Even as almost 2,000 staff were forced to retreat to their homes from their City offices during lockdown, employees in April bagged a bumper £42million bonus round.

The £3bn group has come a long way. It was founded by financier Stuart Wheeler in 1974 from the top floor of his Chelsea home, as a way for him and his friends to bet on the price of gold.

Wheeler, a keen gambler who used his winnings from bridge tournaments to tide him over in rough times during his youth, built IG into a trading firm where investors could place bets on a variety of assets.

And though it started as a bit of an old boys’ club, used by Wheeler and the friends he had made in the City, it is now a global trading firm headed by banker June Felix, one of the few female chief executives on the FTSE 250.

When Felix, 64, started as boss of IG in 2018, she set out a strategy to take the firm global and diversify the products it offered so clients would invest more of their money through its platform.

And though Felix insists that strategy is going well so far, she is quick not to accredit all of IG’s recent strong performance to her changes.

The increase in household savings, as people cut down on spending during lockdown while they were shut in their homes, is ‘definitely a factor’ driving trading, Felix says. But she adds that ultra-low interest rates have also boosted activity. ‘People are looking for ways to utilise their capital,’ she says.

The level of volatility which the pandemic caused, as the FTSE plummeted when coronavirus hit and bond yields plunged to record lows, also piqued new customers’ interests.

Felix said IG has seen record numbers of visits to its educational web pages, IG Academy and Daily FX, over the last few months. Its average monthly visits are now at around 3.5m, up from 1.5m a year ago. ‘People want to learn,’ she says.

Trading in the 30 minutes following the Pfizer vaccine announcement, which caused a feeding frenzy among investors and buoyed the price of battered UK stocks, was ten times higher than the previous 30 minutes, indicating the number of people lured into playing the market by the coronavirus.

And the fact that IG has been able to allow customers to trade at weekends, when underlying markets like the London Stock Exchange are closed, has also been a positive during the pandemic, since the Government has made many of its policy announcements on a Saturday or Sunday.

Felix notes that IG’s products aren’t for everyone. Its services are more complicated than simply buying stocks or funds through an online platform like Hargreaves Lansdown or Interactive Investor, and though investors have more opportunities to create their own trading strategies, this means more opportunity to lose out.

For this reason, and to keep on the regulator’s good side, IG targets more sophisticated investors. Its typical client is a man, aged 30 to 50, who is wealthy and has had a career in financial services. 

But Felix, one of the few women in a male-dominated industry, is determined to broaden IG’s diversity.

She says: ‘I try to run a meritocracy. We make sure we are gender-blind and colour-blind when hiring, and my executive committee has four female executives out of nine.’

Felix, a Pennsylvania native whose parents emigrated to the US from China, graduated with a first-class degree in chemical engineering. But she points out that many young girls are discouraged from pursuing maths or science careers.

‘That needs to change,’ she says. Her own son ‘got his mother’s math skills’, she laughs, and is now working for a sustainable energy company in the trendy California city of Palo Alto.

Throughout the pandemic, Felix has been focused on making IG an attractive place to work for all employees. She has continued to hold virtual meetings with colleagues across the world, and has kicked off a ‘Walk the World’ initiative with colleagues.

The idea is that IG staff walk indoors and outdoors every day and eventually cover the distance from San Francisco to Melbourne, with each office virtually hosting an event along the way to tell employees about their city and how they’re getting through the pandemic.

So far they’ve logged more than 4,500 kilometres and are on their way to Europe.

IG’s investors and customers will be hoping that Felix’s expansion plan continues at the same pace.