There’s an enormous wave of new investors who are currently changing the brokerage industry in the U.S. Last year alone, it’s estimated that one-third of the U.S. stock market trading was initiated by retail investors.1 In 2020, 15% of investors in the U.S. stock market were first time investors.2 Given these phenomena, one of the prevailing themes that emerges from my conversations with clients is how to better serve these new customer segments.

In my view, the key is to provide the investment return these investors are looking for and engage with them using approaches and channels that align with their behaviors and preferences.

I recently had the pleasure to join a panel on “The Retail Investor Revolution and the Future of Online Brokerage,” hosted by Aite-Novarica. During the panel, my industry colleagues and I examined how online brokerage firms are impacted today by:

  • The rise of more empowered retail investors.
  • Increased client expectations around their digital experiences.
  • The ever-growing client demand for financial advice.

For me, three salient points emerged from our panel discussion:

    1. Personalized advice continues to be very important, even for retail investors.
      A recent Accenture study, Wealth Management, The new state of advice, found that 55% of wealth management consumers in the U.S. and Canada feel that the financial advice they receive is too generic and 34% of wealth consumers said in the same survey they would increase their investments if they received a personalized experience. Based on this, I see two opportunities for financial advisors when working with retail investors: The first is to ensure the advice they offer is in sync with the “moments that matter” to investors. The second is to better align products with investors’ financial goals and intentions, and particularly with the causes they care about. This could include e.g., extending into other financial services product lines, such as banking and insurance offerings or providing advice on ESG (environmental, social and governance) investments and SRI (socially responsible investing). It’s worth pointing out too that 84% of investors indicated they plan on purchasing ESG products in the next year, according to our study.3
    2. The investor digital experience should be more tailored and engaging.
      Digital transformation has been on the management agenda of incumbent wealth management firms for many years. However, with the rise of retail investors, the demand for more personalized and engaging experiences has never been greater than today. Financial services firms could apply the same types of algorithms to drive engagement that big techs use with their customers. For example, 32% of investors would like better product recommendations (similar to Amazon’s “suggestions”).4 No matter which generational bracket investors fall into, compelling digital experiences should be ubiquitous for all.
    3. As new technology tools and digital experiences evolve, investor protection should be a top priority.
      The increase in retail investments has pushed regulators to take a closer look at the number of violations and the lack of guidelines around many of these technology developments.5 To manage their risk exposure, it’s important that firms keep an eye on how information is given to investors, whether through face-to-face advice, a digital app or social media channels.

The rise of the retail investors opens many opportunities for financial services firms. At the same time, it shines light on the flaws of how some firms operate and run their business models. To help mitigate these gaps and stay ahead, leaders should bridge digital, advice and service, while equipping brokers or advisors with the skills and technology they need to create a seamless customer experience and accommodate the growing number empowered of retail investors.

By paying close attention to these three crucial insights, you could turn marketplace changes into a competitive advantage. I’m happy to discuss this topic offline, so feel free to connect with me on LinkedIn.