On Monday, February 5, the Dow Jones industrial average dropped 1,150 points, which at the time was the biggest single-day point drop in the index’s history (even though it did not crack the top 20 in terms of single-day percentage declines). That day, The Wall Street Journal reported that several brokerage firms and mutual fund firms suffered outages and slowdowns that day as individual investors tried to access their accounts during the sharp market decline. Among those firms hit were robo-adviser Betterment LLC, digital adviser Wealthfront and brokerage firms Charles Schwab, TD Ameritrade, T. Rowe Price and Vanguard.
AAII Weekly Survey Question
Seeing that some big-name financial services companies experienced slowdowns or outages during the market’s severe drop, we wanted to see if our readers experienced similar issues. So, last week’s survey question asked:
Did you experience problems logging into your online brokerage account(s) this past week?
Here are the results:
In all, 2,031 readers participated in the survey.
The majority of our readers, 64% in all, did not have troubles logging into their brokerage accounts during the market outage of a couple of weeks ago.
Nearly one-fifth of readers (19%) said they didn’t try to access their accounts during the market turmoil.
The remaining 17% said they did experience problems trying to access their online accounts during the high-volume and high-volatility market day.
Weekly Special Question
According to The Wall Street Journal article, when reached for comment, most brokerage firms said those who could not access their online accounts during trading hours might have their commissions waived or receive free trades, but that they would be evaluated on a case-by-case basis.
In response to these slowdowns and outages, last week’s special question asked:
What recourse should individual investors have for not being able to trade during these periods?
Overall, we received 260 responses to the question.
Most readers are resigned to the fact that retail investors have very little direct recourse against their brokerage or finance services firm in the event they are not able to access their accounts during periods of high market volatility. Roughly one-quarter of respondents (26%) see the biggest recourse they have as “voting with their feet,” or changing brokers. Unfortunately, that isn’t the most streamlined or convenient process for most.
A little more than 11% of respondents believe they do deserve compensation in the event they are not able to access their account during days in which the market experiences significant swings.
Another 10% say that brokerages and other financial firms should be held legally responsible for not providing the infrastructure to handle the increased online activity that usually accompanies big moves in the stock market.
Yet another 9% said that firms should devote more resources to allow account holders alternate means of trading if they experience online slowdowns or outages.
Meanwhile, a bit more than 6% of our readers believe one shouldn’t be accessing their accounts on big-move days in the market.
Here is a sampling of the suggestions readers offered regarding what recourse individual investors should have if they are not able to access their online accounts during periods of high market volatility:
- “Find a different brokerage.”
- “An emergency contact number … but this is a long shot at best.”
- “It may require arbitration or free trades in the future. However, it’s difficult to assess as everyone is different.”
- “At a minimum, the brokerage should waive fees and commissions for a period after the issues occur.”
- “I would consider the inability to get to my account a breach of contract.”
- “Most retail investors who have a long view should not be trying to trade during periods of high volatility.”
- “Seek SEC, FINRA and state investigation, provide brokerage public disclosure of such complaints with financial and license penalties.”
Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.