Hospital Prices Remain Largely Unhelpful.
While Starratt emphasizes the positives that come with broader knowledge of and access to investing strategies, he notes that DIY investors can fall risk to misconceptions. When it comes to margin accounts, he notes that some investors will think of margin as the sole means by which they invest. They could be exposed to undue risks and forced to settle huge margin calls if their accounts are found to be in a loss position. That said, if investors are entering these accounts with clear eyes and appropriate education, then Starratt says it could be a great way to gain exposure to investing.
Michael Arbus notes that many platforms, including his own, build in additional protections before offering DIY investors margin accounts. Arbus is the CEO of Moomoo Financial Canada, part of a large global investment platform with around 25 million clients. He explains that in Canada, the risk questionnaires for clients who want to use margin accounts are more robust than ordinary accounts. Moreover, his platform will flag possible discrepancies or misrepresentations, which will then trigger manual follow ups to verify if an investor is suited to the use of a margin account.
As advisors consider the ways DIY investors are using these platforms and strategies now, Arbus argues that they shouldn’t see this as a threat to their business. He believes that investors can move from the DIY to the full service channel. Moreover, many full-service clients will end up using platforms for margin trading, crypto investing, and other strategies that they might not be able to access through their advisors.
“I think that there’s a secondary account model here,” Arbus says. “If you ignore it, your clients are going to do it anyways. Or you can make it a part of your offering and say, ‘here’s a great app.’”
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