How a pandemic may fundamentally shift the way people manage finances

Pandemic-driven behaviors brought the financial services industry to an inflection point – the way
investors manage money will never be the same


September 28, 2021

By Neesha Hathi, Chief Digital Officer

It is often seminal events that lead to fundamental and lasting shifts in consumer preferences and behaviors.

This is something Schwab knows a thing or two about. It was regulatory change that led Chuck to form the company in 1971, opening access to the markets and leading to the rise of the individual investor. It was the emergence of the Internet in the 1990s that led people to move their financial lives online. And it was the Global Financial Crisis in 2008 that in many respects drove mistrust of the traditional Wall Street advisory model and in part led to the formation of tech-driven robo advice. We are at one of those inflection points now. While COVID-19 is not behind us, we’ve reached a stage in the pandemic where we can already observe how it has fundamentally changed many consumer preferences and behaviors.

Neesha quote

"Over the last 18 months, Americans turned to digital technology to accomplish what they suddenly couldn’t do in person – meet with their doctors, socialize with friends and family, shop for their groceries. They also changed the way they manage their financial lives, quickly getting accustomed to relying on technology for everything from meeting virtually with financial professionals to conducting transactions on their phones for the first time."

Neesha Hathi, Chief Digital Officer


Article con't

According to new Schwab data, four in 10 US investors say they used technology and digital tools to manage their finances more during the COVID-19 pandemic than ever before.

But this story is about more than technology alone. The pandemic has changed consumer behaviors and preferences in more nuanced ways. We aimed to peel back some of those layers in our latest round of Schwab research. Here are some of my takeaways:

The leap in digital adoption is here to stay

Now that there are more opportunities for in-person meetings and interactions with COVID restrictions changing, some investors will choose to mix them back into how they manage their finances. But the broader trend line suggests that the increased pace of digital adoption we’ve seen throughout the course of the pandemic is here to stay. One in three investors say they will continue to adopt technology at a faster rate post-pandemic, and one in five believe that technology will fully manage their investment portfolio within a year.

People have gotten more familiar with using digital tools and see the value and efficiency they can provide – delivering simple, personalized experiences that help them meet their financial goals. At Schwab for example, mobile trading quadrupled last year and we had 1.5 billion mobile and web logins (combined with TD Ameritrade), no doubt in part due to the pandemic. Our survey data also shows that many investors plan to continue doing some financial tasks digitally moving forward, such as using payment apps, online tools and apps to manage personal finances, and video meetings with their financial advisors.

That said, it’s important to distinguish exactly what it is people like about technology. One clear upside is that it’s easy and saves time. Take, for example, the experience of getting basic questions answered quickly online versus having to wait to speak with a customer service person. Overall, our study found 70% of people agree that technology decreases the amount of time they spend managing their finances. And while we’ve certainly seen some significant innovations in the investing space in recent years, most investors say that technology can have its greatest impact when it comes to improving how we accomplish simple, transactional activities. This is what we call modernizing the mundane – at Schwab one of our areas of focus is on leveraging technology to simplify mundane tasks like transferring funds, taking a required minimum distribution, or recovering a password, so that investors and their advisors have more time to focus on the fun stuff like planning for their financial goals.

Technology adds value but doesn’t replace people

Investors are clearly enjoying how technology frees them up and adds convenience to their lives, but they do not see technology as a complete replacement for what human beings do best.

This came through loud and clear in our research. People continue to want human support for the more complicated things, like creating a financial plan, giving financial advice, and creating a personalized investment portfolio. Tellingly, when the markets wobble and uncertainty rises, the first place investors say they’ll go is to financial advisors.

I believe this has to do with trust. While comfort with technology has risen during the pandemic, more than half (59%) of investors trust people to manage their money more than technology. This is one of the reasons we are so focused on combining the best of people and technology in our products and services, so that investors have the benefit of ease and transparency through digital tools balanced with the guidance of a real person when they really need it. It’s our experience working with millions of investors that very few want an all-digital or all-human experience for their entire investing lives. They’re looking for the best of both.  

The pandemic has spawned a whole new generation of investors

One of the most remarkable outcomes of the last 18 months is the number of new investors who have come into the market. We call this cohort “Generation Investor” (or “Gen I”), and they have some serious size and sway, making up 15% of total stock market investors in the US according to previous Schwab data.

Gen I has a unique investing profile. They’re early adopters of technology and about twice as likely as more experienced investors to invest for fun or to start a business. Their investment time horizons tend to be shorter, with only about 38% currently focused on retirement. They are more likely to consult online investing influencers and social media for insight than seasoned investors, and more likely to view cryptocurrency as something that will have a significant impact on how they invest in the near-term.

Perhaps the most surprising thing about Gen I is that while many are young and tech savvy, they value access to financial professionals as highly as other investors. Gen I members think that people are preferable to technology when it comes to more complicated things like giving financial advice, understanding an investor’s entire financial situation, and providing support when they have questions. The first resource they want to reach out to if the stock market dips or spikes is also a financial professional. There is a misconception that investors just getting started want to do everything on their mobile devices, but they too want to know that they can call a real person when their financial life gets complicated.

Where we think this is going

Those who imagine a future where technology largely replaces humans are likely to be wrong. While there is a lot of attention on the increased use of technology and digital tools during the pandemic, it has also been a time when human guidance and support have emerged as more important than ever. During this time, investors, having had to manage tumultuous markets and uncertain financial futures, have continued to look to humans as trusted sources of connection, validation, and advice.

But we’re also not going back to where we were before the pandemic. People have gotten comfortable with using their mobile devices and digital solutions to help manage their financial lives in new ways. The opportunity to tap into this new consumer mindset to innovate is tremendous and for us at Schwab, we will leverage this momentum to introduce new and better ways to help clients achieve their goals through the power of both people and technology.