Fractional shares are helping to drive increased trading, especially when it comes to shares of in-demand but high-priced technology stocks like those of Amazon, financial industry executives said Friday during a JConnelly Virtual Media Roundtable.
About 50% of trades made across Apex Clearing’s clients’ platforms during the second quarter of 2020 were fractional-based, according to Bill Capuzzi, the firm’s CEO.
Although many investors believe in the concept of investing in companies they know and most investors are Amazon customers, most accounts “don’t have enough money in them to buy even one share” of that firm’s stock, and “that’s a problem,” he said.
Amazon was the second-most popular stock owned by millennial investors in the second quarter, according to Apex. But one share of it closed the quarter at $2,759, an amount larger than the average millennial investor’s overall account value, Apex noted.
We are, however, “starting to see companies which have historically over the last five years just let their stocks continue to run up” now do “stock splits to bring that price [down to a] somewhat more reasonable” level, he said.
The additional challenge is “there aren’t that many folks out there that are offering fractional share custody,” he said.
That, however, is starting to change. In May, Charles Schwab said it would soon let retail investor clients buy partial shares of S&P companies’ stock. That news came almost seven months after Schwab said it planned to move into fractional shares. Schwab Stock Slices became available in June for as little as $5 each.
One factor that has “fueled a lot” of growth for investment and banking fintech firm Stash is its Stock-Back program in which clients get stock rewards whenever they use their debit cards for a purchase, Brandon Krieg, CEO and co-founder of that firm, told viewers.