When I was a child, my parents would file away what seemed like mountain-high stacks of financial papers and documents for their records. As I got older and time passed, I remember seeing mom and dad become less flustered around tax season and spend less effort “gathering the papers” for their quarterly financial advising meetings. There was a literal transformation happening in my home thanks to a new resource called the internet.
With the emergence of the internet came mobile phones, fintech apps and user-friendly digital experiences, making money management and financial advising more convenient, digestible and transparent. Financial technology became a partner in a family’s financial decisions. As this trust grew, a group of investors that Charles Schwab has dubbed “Generation Investors” or “Gen I” was born.
In our latest white paper, The Evolution of Fintech, the Modern Investor, and Tomorrow’s Advisors, we explore what some have termed the blurred line between advised and self-directed investors, including a deep-dive into the emergence of Gen I. Here’s a sneak peek:
Three Moments that Led to the Emergence of Gen I
These investors may be inexperienced, but they represent a sizable portion of the market (estimated at 15%) and they’re positioning themselves to take control of their finances and grow wealth.
According to a Schwab study:
- 94% of Gen I want access to information and tools so they can perform their own research.
- 90% of Gen I want educational materials to improve their investing skills.
- 82% of Gen I are open to working with an investment professional who can provide ongoing help and guidance.
1. Innovation Changed The Consumer Mindset.
In its infancy, many were skeptical of the internet and doubted its sophistication and potential to contribute to the future. But, here we are, almost three decades later, and the information superhighway is a sort of omnipresent force, influencing most of our day-to-day decisions—including how we manage money.
Millennials trust fintechs (75%) almost as much as traditional institutions (79%), finds a report by Plaid. Notably, the reports finds Gen Z actually trusts the former (66%) more than the latter (63%).
2. The Wealth Castle’s Gates Lowered. All Are Now Welcome.
Fintech’s boom has benefited the everyday investor enormously, as investors now have much wider access to financial services. If yesterday’s barriers to entry were akin to castle walls, today’s are more like waist-high picket fences. Brokerage platforms are expected to offer investor-friendly features like nominal or nonexistent account minimums, fractional shares, and zero-commission trading. Or else they may not be able to compete.
3. Communal Hubs Shattered The Opaque Glass that Siloed Personal Finance.
Thanks to trading apps, buying shares of trending stocks is basically as easy as publishing a tweet. But who’s to say you can’t do both?
The internet not only paved the way for fintechs to grow but also fostered an everlasting cultural movement — community building. People are more willing than ever to share personal financial information and opinions on social media platforms like Twitter, Reddit, and TikTok. In that sense, usability has become a distinguishing feature for platforms as well.
Investors have an arsenal of tools at their disposal, if they so choose.
Wrap Up
Financial technology has revolutionized money management and the investor experience. Investors are more tech-savvy and, therefore, more critical about digital capabilities in an application or service provider than ever before, placing substantial pressure on wealth management firms and advisors. Those who incorporate frictionless UX and robust features into their platforms will likely be competitive — those who don’t may lag behind indefinitely.
Click here for access to the full white paper The Evolution of Fintech, the Modern Investor, and Tomorrow’s Advisors to further explore the blurred line between advised and self-directed investors, the transformation of financial technology, and how the adoption of third-party digital tools may be separating the winners from the losers in the investment advisory space.
Resources
- Charles Schwab, https://pressroom.aboutschwab.com/press-releases/press-re- lease/2021/The-Rise-of-the-Investor-Generation-15-of-U.S.-Stock-Market-Investors-Got-Their-Start-in-2020-Schwab-Study-Shows/default.aspx
- Plaid, https://assets.ctfassets.net/ss5kfr270og3/5ibIlvGqujqTL- ronm8XgBX/19a1d7482945ddc2789a1d195dd91332/Fintech-Effect-2021.pdf
