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Self-Directed Investing in 2020

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13 July 2020
Ashley Longabaugh

In my upcoming report series on the self-directed brokerage market, I explore the tectonic shifts that have occurred in the retail brokerage market, and how, aside from pricing, brokerage firms can capture the influx of retail traders, as well as nextgen investors.

For the cash and time-rich investor, the stock market has been a playground during the COVID-19 pandemic. Trading volumes, net new assets, and new account openings have skyrocketed at both US and UK platforms.

The pandemic is not the sole reason for the flood of retail traders or high usage of digital tools for remote-working advisors. The move to zero commissions at almost all the major brokerage firms in the US is a serious step towards the democratization of the financial markets. Traditional brokerage firms are becoming smarter about capturing the tech-savvy investor – and they may have no choice but to tear up their conventional approach of servicing clients as incumbent firms have proved successful at attracting nextgen clients.

The strategic use of big data, analytics, AI and ML, APIs, ESG ratings, and cloud are a big part of the story. It’s not enough to offer only zero commissions or a sleek UI in today’s competitive environment – customer loyalty is low and firms need to discover what their differentiator will be. Opportunities for the industry to reinvent itself and attract new clients remain bountiful through the application of today’s digital tools, which can create that ubiquitously sought-after personalized customer and advisor journey.

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Celent will analyze the change in the core client base and the growing number of incumbents or niche brokerage platforms and the pressure this is putting on the traditional brokerage market. Celent will examine how, apart from pricing, brokerages can stand out from an increasingly crowded marketplace by empowering the self-directed investor through today’s emerging technology, such as AI-powered insights, cloud computing, APIs, and big data analytics.

Celent will also address the impact that the COVID-19 pandemic has had on brokerage platforms and the investor base, specifically addressing the demand for ESG investing, education features, goal-based planning and financial planning tools.

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