The surge of retail traders entering the stock market is straining systems for online brokers

• The surge in retail investors is putting a strain on systems at online brokerage firms, according to a J.D. Power survey published Tuesday.
• More than 10 million new brokerage accounts were opened in 2020, the study found.
• Robinhood opened the most retail accounts and Vanguard topped satisfaction ratings.

Retail investors using online brokerage accounts are increasingly running into problems, including issues with trade executions as companies deal with a jump in the number of clients, according to a study published Tuesday.

Retail brokers have struggled to ensure a smooth customer experience as the industry opened more than 10 million new accounts in 2020, underscoring the surge in interest in investing during the COVID-19 pandemic, said data analytics firm J.P. Power.

Troubles with websites, trade processing and execution, and account statements are among the most frequent sources of problems for retail investors, said J.D. Power whose survey was based on the responses of 4,895 investors who said they make all their investment decisions without consulting a full-service, dedicated financial advisor.

The firm said problem incidence has doubled in the past year, affecting 11% of all Do-It-Yourself investors and 12% of those in the seeking-guidance segment of self-directed investors.

"The significant influx of new investors - and increased trading volumes and overall engagement from clients - clearly put a strain on the system and a spotlight on some of the most critical areas that firms need to address if they want to continue to attract and retain self-service investors," Michael Foy, head of wealth intelligence at J.D. Power, said in a statement about the study.

Retail investing was thrust further into the mainstream this year as many retail customers active on Reddit's Wall Street Bets forum and other online investing sites early this year forced a squeeze on hedge funds shorting shares of video game retailer GameStop.

J.D. Power said overall customer satisfaction scores were 148 points higher, on a 1,000-point scale, among do-it-yourself investors and 155 points higher among those seeking guidance when they strongly agree that their brokerage provides useful guidance or advice.

"Despite this significant boost to customer satisfaction, fewer than half of self-directed investors say their firm provides useful guidance or advice," said J.D. Power.

Vanguard ranked the highest in self-directed investor satisfaction among investors seeking guidance, with a score of 736 on a 1,000 point scale. T. Rowe Price and Charles Schwab ranked second and third, respectively.

Robinhood logged the most new DIY account openings, grabbing 27% of such accounts, according to the study. "While its market share has grown, its strength in digital channels and value for fees was offset by poor performance on trust, people and problem resolution," said J.D. Power.

Robinhood ranked fourth in satisfaction among DIY investors. That group was topped by Vanguard followed by Charles Schwab and T. Rowe Price.

The responses for the study were collected between December 2020 and February 2021. J.D. Power has published its U.S. Self-Directed Investor Satisfaction Study for 19 years.