I spoke at the Trading & Investing Expo last weekend in Sydney. As the biggest independent expo on the investment calendar, it has always been an interesting window on how the sharemarket is developing.
There was a time when the expo was a gathering of full-service stockbrokers bristling with tradition and integrity. Polite if competitive. Senior partners on display. Those were the roots and they remained pretty much undisturbed until some cutting-edge exhibitors turned up one day and started offering access to these rather risky derivative thingies called options, which unsettled, upset and confused the traditional broker. At the same time, it set the mould for the expo as a showcase for what's next in finance.
Over the years you could see how the industry was progressing.
Options gave way to futures, futures gave way to warrants and warrants gave way to the internet, which - understandably - caused a major shift in expo focus.
From the early 2000s, the expo became a platform for the innovation and growth of online brokers who were instantly propelled to platinum sponsor status by their success. It was a revolution and the traditional brokers would have done well to have spotted it earlier.
The ability to trade from your kitchen spawned the next revolution, the push for individuals to "take control", and the explosion of the self-managed superannuation industry began (another growth business that came through the expo circuit).
The evolution continued. Next came technical analysis. Compared with the rather grey regurgitation of fundamental analysis, the colourful art of predicting share prices through technology swept in and blossomed. The internet was the perfect medium. Charts, colours, calculations and keyboards. Perfectly suited to a computer chip and its lack of emotion, and for a moment there it got a bit out of hand. Black-box CD-set sellers proliferated and for a time we had a saying: "What's the difference between a new investor and a professional technical analyst?" The answer was "two weeks" or "two grand", take your pick.
The internet opened the financial space to prolific software developers and expo products proliferated. It was all part of the cycle that had to be and has been reigned back to credibility, with hardly a box set to be seen last weekend. Technical analysis - or more accurately, trading skill - is now a core educational focus for expo talks and seminars, and in a market that requires you to do a lot more than simply invest and have patience everyone is on the bandwagon.
But it doesn't end there. The latest wave to sweep over the financial landscape is of course contracts for difference (CFDs) and their cousins, foreign exchange trading. CFDs in particular haven't had the best of press but the message is already out there and is now openly touted by the providers themselves. They are risky, not suitable for all investors and "you can lose more than your initial deposit". In other words, they are for people that know what they're doing. But when you're over that, the expo is the Aladdin's cave of software innovation the potential of which is almost more compelling than the underlying purpose.
And that's about the state of financial product evolutionary focus so far, although the wheel is still turning and the next progression is already becoming apparent.
Emerging in the expo now are the "no bull market in equities" products and although they're not front and centre yet, you can't help but notice them. There is a new strong showing from the fundamental value products, for instance, and a number of other "in any market" products such as exchange traded funds, Chinese investments, art, wine and we are almost full circle now with the full-service brokers returning to cater to the plethora of investors for whom "independence" didn't work out.
If there's one thing you can rely on, it's the human ability to adapt and whatever the state of the sharemarket the finance industry does adapt and is adapting. The next expo is in Melbourne in October, in case you want to know what's going on.
Marcus Padley is a stockbroker with Patersons Securities and the author of sharemarket newsletter Marcus Today. His views do not necessarily reflect the views of Patersons.