Investors today know and understand the markets better than in the past. There is a greater curiosity and ongoing interest. This demand for knowledge and accessibility will continue to grow.
One of us has a 14-year-old son who monitors the value of his Disney stock on his iPhone every day. He can see the five-year history and the five-hour history. He discusses additional stock opportunities he is considering based on his ongoing review of the market. He sort of understands the subprime disaster (probably better than most of us). He and his friends talk about baseball, videogames, girls (probably) and the stock market. Imagine what his knowledge level will be in 30 years.
There was a home show over the weekend that highlighted the home electronics of the future. There were screens in each room to access the Internet, review the systems throughout the home, set different temperatures throughout the house and play whatever music the occupant of each room desires. Thirty years from now we will be trading stocks from each room.
Ten years ago online trading was first being tested in the research we do with wealthy households. In 1997, 75 percent of the affluent ($500,000 investable assets NIPR, or not including primary residence) were online, but by the year 2000, only 18 percent traded securities over the Internet. Today over 90 percent of affluent households, regardless of age, are online and 66 percent actually trade stocks online. Five years ago no one knew what an ETF was nor did they intend to invest directly in overseas companies. Today 30 percent of affluent households plan to invest directly in China in the next 12 months.
In 30 years, we will trade types of securities that do not even exist today. We hope that the government will eventually step in and figure out how to guarantee that investments can never lose more than a certain percentage. The exchanges as we know them today will be gone. Securities will be traded throughout the world 24/7 online from the comfort of one's home. Investors will be as familiar with companies and conditions in Nepal as they are with Arizona. The economy will be a global economy.
There will still be a need for advisors. Advisors will be specialists well-versed in their area of expertise. For those of us who don't have the time to review and research everything, there will also be generalists who bring together specialists to understand the investors' needs. Think about the medical community: You have a generalist that connects you to the heart specialist or oncologist. Your advisor will connect you with the India or China expert, or the long-term bond guru.
This is our prediction for the market and it will hold true, if baby boomers don't lose all of their money paying for health care.
Catherine S. McBreen and George H. Walper Jr., Spectrem Group's managing director and president, respectively, are authors of the new book Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America's Richest Families (Portfolio, January 2008). Spectrem Group is a strategic consulting and market research firm specializing in the affluent and retirement markets.