Explosion In Retail Trading Accounts

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In their recent episode of the VALUE: After Hours Podcast, Jake Taylor, Bill Brewster, and Tobias Carlisle discussed the Explosion In Retail Trading Accounts. Here’s an excerpt from the episode:

Tobias: This is a factoid. I learned from Vincent Deluard yesterday. There are currently as many brokerage accounts as there are households in the US, and this is a big step-up from recent times. I looked at the start of the year, there were 100 million at the start of the year, brokerage accounts, for about 122 million households. In the US in 2013, which was the last time I could get data. There were 17 million brokerage accounts. So, in eight years, we’ve put on-

Jake: 5x almost?

Tobias: -83 million plus brokerage accounts. But in 2001, there were 19 million. So, in 2013, there were fewer than there were in 2001.

Jake: Because they’ve got blowed up.

Tobias: I think that’s what happened, and then there was a long time of the market. So, going backwards, like you remember from 2000 to 2013, SPY was flat or backwards.

Jake: That’s no fireworks.

Tobias: It’s not much fun there, and it’s been on a vertical ramp since about that time to today. So, that’s probably why there’s a lot more brokerage accounts. What do you guys think?

Jake: Sell everything. No, I’m just kidding.

Tobias: It’s not a market call. This is just–

Jake: Oh, okay.

Tobias: There’s a particular provider who you’re always dunking on but have they mindfully or have they knowingly created this environment where it’s incredibly easy to sign up now, and it’s incredibly easy to trade, and then you’ve got these that they’re meeting all of the four criteria for inducing a gambling addiction in somebody?

Bill: Yeah, I don’t know. I want to be like fuck them, but I don’t know that thought’s right. As it pertains to Robinhood specifically, the idea that they at least historically have not provided the customer service is atrocious. The actual inducement of people to sign up for brokerage accounts does not bother me that much. Even options trading, the only reason that I’m doing what I’m doing is that I came in through options trading. So, I don’t know.

I have really mixed feelings. I don’t like the gamification, and I don’t like the idea that discount brokerages can just basically provide absolutely no support, and then just say, “Well, externalities are to the rest of society, and we don’t have any responsibility.” That really bothers me. But I don’t know. I guess I would need to know the definition of a brokerage account. If a brokerage account can have five bucks in it, then how much are we really talking about? My intuition–

Tobias: There’s probably quite a few of those around. There’s probably quite a few. I’ve probably got one that I’ve forgotten from 20 years ago.

Bill: Yeah.

Jake: How much was the last stimi check? It’s probably about how much is in there. [laughs]

Bill: No, probably, less. People are trading it.

Jake: Oh, yeah.

Tobias: The average is quite high.

Bill: No.

Tobias: The average is like 300. Well, the last day that I saw which is this is the 2013 data, but the average was like $357,000 in the account. Averages– [crosstalk]

Jake: We need a median probably for this.

Tobias: Yeah, average is a skewed. That was just all the data that I had. It’s actually pretty hard to track down that data. I tried to google around for it and couldn’t pick it up.

Bill: If Google can’t do it, no one can.

Tobias: Yeah, well, that’s fair. Vincent would know.

Bill: Yeah, I don’t know. Certainly, it would be one of the things that you could take on to the late cycle indicators if you were so inclined.

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