Better investor education, access to new markets and improved trading infrastructure are among the ways tech will shape retail investing's next wave, according to members of Protocol's Braintrust.
Director of Investing at Betterment
With the rollout of apps like Robinhood and the rise of zero commission trading, technology has greatly reduced the barrier of entry for individuals wanting more control of their personal finances to work towards future goals for the future. We can expect technology to continue helping individual investors find new or more efficient income streams, in addition to helping prevent "blind spot" charges which can add up over time.
Additionally, technology provides investors access to more sophisticated and automated online money management systems. They won't replace hands-on, DIY investing, but rather supplement it to promote smarter long-term strategies and decisions.
With individuals now having access to a mountain of financial information at their fingertips, technology will better standardize formats and make it easier for investors to repurpose information from one platform to another in an effort to produce the most accurate data.
Founder & CEO at Yieldstreet
Individual investors at their core won't change. We want to invest, become prosperous, the same way our forefathers did 200 years ago and will be in the next five or 50 years. What is changing is that the individual investor will simply be more empowered, more educated and will have tools to make real-time decisions. They will likely flex their muscles to influence investment areas such as options trading, alternatives, crypto, where they previously had little to no presence.
Technology is a great equalizer, upending a number of industries ranging from taxis and Uber or hotels and Airbnb. Already individual investors have access to all types of tools and information to make investment decisions at their fingertips, whereas our parents used to have to go through brokers and someone literally standing on the floor of the stock exchange shouting orders. In contrast, when we launched our mobile app, one of our investors made an investment from the middle of Lake Michigan, probably fishing with his son.
Tech is helping individual investors gain access to what has historically been the domain of the 1%. With tech we can reach any consumer and educate them. Add education to access together and you get democratization, which has the potential to shrink the opportunity and wealth gap and help people to grow their income. So for the next five years, it will be good to be an individual investor.
Founder at Burnmark
The demographics and investor profile of the individual investor have evolved significantly in the last five years — all thanks to technology. We will continue to see further changes in the demographics due to the improved access offered by robo-advisors and hybrid investment products, and likely see more gender balance, a younger population and emerging market investors.
Robo-advisors have been really good at lowering the minimum investment levels and offering micro-investing products, thus bringing in a much younger population into scalable investing. In the next five years, I expect to see an increased interest in sustainable investing and passion-based investing (investing in limited edition sneakers or vintage cars for example!) due to this demographic shift.
President, Bank Broker Dealer ICS at Broadridge
Technology will enable and drive greater individual investor adoption and engagement by providing a stronger and better user experience (especially mobile-first) and enabling commission-free, self-service trading platforms as well as technology-driven advisory options (robo-advisors). It will help facilitate greater access, education and opportunity to investments, markets and financial instruments (i.e., crypto currencies, new investment derivatives, investing in start-ups, etc.).
All of this will lead to greater empowerment as more individual investors participate in the capital markets, with increasing proportion being influenced by environmental, social and governance factors. While these trends impact most demographics, millennials in particular will be most positively affected by advances in technology and the capital markets.
CEO and Founder at Freetrade
We've seen a sharp rise in the number of individual investors active in U.S. and European capital markets.
The next technological shift will enhance the quality of products that are available to these individuals. As more investors become engaged with share dealing, they will begin to expect that the platforms and tools that they use provide a quality product on par with those that, until now, have only been available to large financial institutions. We are already seeing the growth of platforms offering higher-quality data and research products at costs that are far below the typical subscriptions required for institutional quality financial data.
In the brokerage market, direct market access is, and will continue to be, the gold standard demanded by individual investors. The next generation of firms that will thrive are those that prioritize the development of a trading infrastructure that offers retail customers the ability to execute trades on the floors (digital or real) of the world's stock exchanges — effectively offering the same quality of execution available to the largest funds and institutions in the world.
The winners will be the firms that invest the resources to build a resilient technical infrastructure that provides direct access to global markets — not just the U.S. equity markets. This is a time-consuming process, which requires integration with numerous pre- and post-trade venues in numerous countries.
For the first time ever, technology could knit together the plumbing of all global stock exchanges, giving independent investors access in an easy-to-use and resilient app.
CEO at Wealthfront
Nine years ago we revolutionized the landscape for individual investors by offering them access to managed investment services that were previously only available through private wealth managers that required $5 million minimum accounts. Not only did software make it possible for anyone with only $500 to have a globally diversified and rebalanced portfolio of ETFs enhanced with daily tax-loss harvesting, but it also allowed this service to be delivered at a quarter of what the industry typically charged. Software is going to continue to both empower the individual investor and offer unprecedented opportunities for wealth creation.
Today Wealthfront is enabling a future where your personal finances can be put on autopilot. By integrating banking and investing and applying further automation, we make Self-Driving Money™ possible. By this we mean you can direct deposit your paycheck with us, have your bills paid automatically and the remaining money is routed to the most appropriate destination, be it a high interest savings or investment account, depending on your situation and goals. In addition to helping you build wealth, Self-Driving Money™ will remove the stress and time associated with personal finance and allow you to focus on building your career and living a more enjoyable life.
See who's who in the Protocol Braintrust and browse every previous edition by category here (Updated Feb. 19, 2021).
Kevin McAllister ( @k__mcallister) is a Research Editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.
More from Braintrust