How London rose from oblivion to be a crowned king of the stock markets.
With the coronation of King Charles III almost upon us, interactive investor, the UK’s second-largest investment platform for private investors, looks back at the history of investing over the last 70 years.
Alice Guy, Head of Pensions and Savings, interactive investor, says: “Long gone are the days when investing was for the very wealthy few and meant fighting your way through the bowler hats to visit a dusty stock-broker’s office. Now we can all buy shares cheaply at the click of a button, thanks to the rise of investment platforms.
“And the amounts you need to invest are no longer a king’s ransom, and can fit a much broader range of budgets. Investors can invest monthly from just £25 per month, and for funds, investment trusts and popular UK shares, ii customers can invest monthly for free. Investment platforms first burst on to the scene in the 1980s and 1990s, getting an extra boost with the rise of the internet in the late nineties and early noughties.”
interactive investor can trace its history back to 1995 and was founded to provide front-end research to the investment community and provide a platform for investors to communicate through discussion boards, long before social media was even a ‘thing’. ii continues to innovate on content, with pioneering multimedia which has been viewed millions of times.
Stagnation and decline
Guy says: “In the early 1950s, the London Stock Exchange was in the doldrums, run by a declining number of members, hamstrung by regulations hanging over from the war and focused on selling government debt rather than shares. During the war it had become a quasi part of the government, helping the Treasury raise finance and in turn was protected from competition.
“Throughout the 1950s [and into] 1960s, the stock exchange introduced ever more restrictive listing requirements and began to face increasing competition from provisional exchanges and non-members stockbrokers. As an unofficial government regulator, the then over-cautious London Stock Exchange blocked investments in riskier smaller companies, just where the biggest profits could often be made.”
Start of a turnaround
Guy continues: “In the 1970s, the London Stock Exchange became more powerful as a stock market crash led to a consolidation of stock exchanges. The stock exchange was more powerful but still no match for challenges by foreign exchanges and firms who allowed investors more choice.”
The Big Bang
Guy adds: “In 1986, Margaret Thatcher’s government introduced new “Big Bang” measures which would change the face of investing in the UK. New rules abolished fixed commission charges and the distinction between jobbers and stockbrokers; allowed foreigners to enter stock market membership and changed the London Stock Exchange to screen-based trading.
“The Big Bang changes bolstered London's place as a financial centre and by 2006 it was the most important financial centre in Europe and arguably the world.”
Privatisation and carpetbagging
Guy says: “Outside London, for many Brits, the privatisation of well-known industries such as BT, British Gas and British Airways during the 1980s was the first time they became shareholders as many previously nationalised industries became private companies and shares were sold to the public.
“The demutualisation of building societies during the 1990s was another opportunity for ordinary Brits to become shareholders. Commonly known as carpetbagging, many savers were given shares as building societies changed their structure from member-owned mutuals to companies. And many opened new building society accounts deliberately in the hope of getting shares.”
Guy adds: “The boom of the internet and smartphones since 2000 has continued to change the face of investing. Investors now have a world of information at their fingertips and can buy and sell shares at the click of a button. The continuing success of apps and investment platforms has opened up investing to a tech-savvy audience, allowing investors to actively monitor performance, get information on their portfolio and research and compare investments like never before.”
Pension freedoms and the rise of defined contribution pensions
“The gradual rise of defined contribution pensions since 2000 means that most of us are now investors, whether we know it or not. The success of auto-enrolment since 2012 means that 90% of eligible private sector employees now pay into a workplace pension and their contributions are invested mainly in equities and bonds. Defined contribution pensions now have total assets reaching an estimated £2.5 trillion in 2021, according to ONS.
“With the last 70 years a story of continuing innovation and the rise of the ordinary investor, it’s an exciting time for the investment industry. There’s still a job to do as many pension savers don’t look under the bonnet or, perhaps realise they are investors. We need now, more than ever, to engage with ordinary investors to help them understand more about investment and how to build their wealth for the future.”
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.