Since the start of the pandemic, State Street Global Advisors has “seen a significant number of new investors enter the marketplace,” according to Kelly Ryan, head of independent wealth management.
This increase has been boosted by the growing popularity of fintech platforms like Robinhood, which make it easier for young and other new investors to jump into the market on their own.
Also driving the trend has been the shift to $0 commissions that “started to allow fractional shares to be traded, so now you don’t have to have a significant amount of money to enter the stock market,” Ryan said.
Those factors, along with the pandemic’s dampening effect on discretionary spending and the growing importance of social media influencers, have led to a large number of entrants and a surge in new trading accounts, she explained.
While many new investors don’t have a large level of assets to invest in the markets today, they may in the future. So, “there’s a real opportunity” for advisors to attract young investors now and educate them, Ryan said.
Thus, taking steps to draw these prospective clients is an important way to invest “in the future of your practice,” she added.
Here are three tips from Ryan on how advisory firms should reach out to DIY and other new investors:
1. Encourage them to talk about investing with their families.
When clients and their kids are ready, it is a great idea to educate children about the basics of investing and the money marketplace, according to Ryan.
This includes teaching them terminology: What a margin account is, what an equity is, and “when would you sell something short or why would sell something short?”
2. Let young advisors work with young investors.
Those advisors who are doing this well are often allowing younger advisors on their team work with young clients, Ryan said.
These advisors “can really connect over social or over digital platforms with those younger investors who want to communicate that way,” she said.
3. Have a strong social media presence.
“With younger investors looking for an advisor, the first thing they’re going to do is go to the Internet,” Ryan said.