The rise of Generation Investor

April 28, 2021 Jonathan M. Craig
See insights from the New Investor Survey and learn why getting started with investing is so important, no matter what stage of life you're in.

The brokerage industry has seen historic growth and engagement among retail investors in 2020 and into 2021. At Schwab, new clients are joining our firm in record numbers, trade volumes during the first quarter reached new highs, and we’ve seen unprecedented levels of investor activity. Last year, we handled 2.3 billion total client interactions through web, mobile, chat and direct messaging. In the first quarter of this year, Schwab opened more than three million new client accounts.

Higher engagement among existing investors is a good thing, but one of the biggest and most important trends to emerge over the last year is the number of people who began investing for the first time. According to a new Schwab survey, 15 percent of Americans who identify as investors today say they got their start with investing last year. We’re calling this group Generation Investor, or “Gen I.”

Our survey also found that the range of new investors who need support to get off on the right foot is wider than many realize. While half are Millennials, 22 percent are Gen X and 11 percent are Baby Boomers. They aren’t all focused on short-term stock trading either: 72 percent of these new investors expect to buy and hold for the long term in 2021 and 90 percent want educational content to improve their investing skills. In short, they are responsible and focused on becoming successful long-term investors.

There are several factors likely driving this surge in first-time investors, along with increased engagement among existing investors, including the evolution toward lower trading costs and recent moves to $0 trade commissions, new products and services aimed at greater ease and accessibility, and the investing opportunities presented by the market volatility we’ve experienced. The dynamics of so many people working from home has also likely resulted in more people spending time investing and focused on the stock market.

Democratizing investing is not enough

This dramatic influx of new investors is something to celebrate because it means more Americans on the path to ownership and reaching their goals. Some industry pundits have described this generation of new investors as uninformed risk takers, suggesting that investing will end badly for them. I could not disagree more, and I strongly believe that financial services firms have a responsibility in this moment to help this group evolve into successful long-term investors.

Schwab and other players in the financial services industry have done a good job breaking down many of the traditional barriers to investing so more Americans can participate in our country’s growth, but accessibility and democratization are not enough. It’s critical that we also give Gen I the resources and support they need to succeed.

Specifically, we need to continue to deliver in four key areas:

1. Provide high-quality educational tools and resources

Our industry has a responsibility to help investors develop the knowledge and skills to be financially confident and become lifelong savers and investors. As we welcomed more investors in 2020, Schwab saw nearly 30 percent growth in traffic to our Insights & Ideas educational content. We also saw a 50 percent jump in visits to Schwab’s Learning Center, our resource for clients to access in-depth trading education. It’s unquestionable that the demand for education is increasing.

2. Make a range of advisory services more accessible to those who want it

Investors of all kinds should have access to tools that help them take control of their financial future. Yet we still often see high investment minimums or fees for critically important services like financial planning and investment advice.

Making planning and advice more accessible to more people is one of the biggest challenges we face in our industry today, and we’ve led the way in this effort. Last August, we introduced Schwab Plan, a free digital financial plan, that has already helped more than 25,000 clients get a better sense for their long-term retirement goals.

In 2019, we began offering subscription pricing for financial planning through Schwab Intelligent Portfolios Premium, which offers a combination of automated portfolio management and unlimited one-on-one guidance from a CERTIFIED FINANCIAL PLANNER™ for an initial one-time $300 fee for planning and a $30 monthly subscription fee. Our introduction of subscription-based planning was driven by our focus on making the investing and planning experience easier, more modern, and more approachable.

3. Nurture young investors’ passion for trading

When investors are first starting out, the conventional wisdom is to create a portfolio of low-cost index funds, which are great for both ease and diversification. But there are many new investors who want to own and trade individual stocks—becoming an owner in a company they know and use in their daily lives is more personal and frankly more exciting.

This group of young traders need level-appropriate education and tools to learn the mechanics of trading and effectively manage risk. And with fractional trading, these investors can potentially trade more, across a broad range of companies, with less capital at risk. Nurturing this passion for stock trading with the right tools and resources will turn Gen I into knowledgeable lifelong investors.

4. Leverage and combine the best of people and technology

At the onset of the COVID-19 pandemic, we all turned to online solutions to help us with everything from getting our groceries to interacting with each other and even managing our finances. In 2020, we saw 2.3 billion client interactions on Schwab platforms, and client mobile usage increased over 50 percent.

Still, even when the best of technology can offer engaging and efficient digital experiences, we all expect that to be combined with personalized service from a person—whether for our groceries or our finances. In fact, investor satisfaction doubles when both digital and human interactions are combined, according to J.D. Power Full-Service Investor Satisfaction Survey, 2020.

Technology gives us the ability to serve clients in a more personalized way than ever before. For example, if a client attempts to make a wire transfer online but then calls Schwab’s service line for assistance, our patent-pending algorithm can instantly route them to the specific service team for help with that transfer. Or during times of extreme market volatility, we can use predictive modeling to identify the potentially most uneasy clients and proactively remind them how to remain focused on their financial goals and feel reassured Schwab is here to help them navigate a challenging market environment.

If we don’t meet this new wave of investors with great experiences wherever they are, while we have their attention, we risk missing out on an incredible opportunity to keep them engaged over the long term.

In fact, as young and new investors see their financial paths evolve and potentially get more complex, many may desire even higher-touch service and guidance from a dedicated financial professional in a branch, which is why we continue to boast a branch footprint of over 400 locations across the United States.

Turning Gen I into Owners

Millions of Americans have begun their journey toward investing in their future, and now that they’ve gotten a taste of investing, Gen I is eager to learn, grow, and build wealth for the long-term.

At Schwab, we’ve always believed in the power of investing to transform people’s lives and that everyone should have the ability to take ownership of their future. So let’s help this new generation of investors seize the opportunity and own their tomorrow.

Investing involves risk, including loss of principal.

Please read the Schwab Intelligent Portfolios Solutions™ disclosure brochures for important information, pricing, and disclosures relating to Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium programs.

Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® are made available through Charles Schwab & Co., Inc. ('Schwab'), a dually registered investment advisor and broker-dealer. Portfolio Management for the Schwab Intelligent Portfolios is provided by Charles Schwab Investment Advisory, Inc. ("CSIA"), a registered investment adviser and an affiliate of Charles Schwab & Co, Inc. ("Schwab"). Both CSIA and Schwab are separate entities and subsidiaries of The Charles Schwab Corporation.

There is no advisory fee or commissions charged for Schwab Intelligent Portfolios. For Schwab Intelligent Portfolios Premium, there is an initial planning fee of $300 upon enrollment and a $30 per month advisory fee charged on a quarterly basis as detailed in the Schwab Intelligent Portfolios Solutions™ disclosure brochures. Investors in Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium (collectively, “Schwab Intelligent Portfolios Solutions”) do pay direct and indirect costs. These include ETF operating expenses which are the management and other fees the underlying ETFs charge all shareholders. The portfolios include a cash allocation to FDIC-insured Deposit Accounts at Charles Schwab Bank, SSB ("Schwab Bank"). Schwab Bank earns income on the deposits and earns more the larger the cash allocation. The lower the interest rate Schwab Bank pays on the cash, the lower the yield. Some cash alternatives outside of Schwab Intelligent Portfolios Solutions pay a higher yield. Deposits held at Schwab bank are protected by FDIC insurance up to allowable limits per depositor, per account ownership category. Schwab Intelligent Portfolios Solutions invests in Schwab ETFs. A Schwab affiliate, Charles Schwab Investment Management, receives management fees on those ETFs. Schwab Intelligent Portfolios Solutions also invests in third party ETFs. Schwab receives compensation from some of those ETFs for providing shareholder services, and also from market centers where ETF trade orders are routed for execution. Fees and expenses will lower performance, and investors should consider all program requirements and costs before investing. Expenses and their impact on performance, conflicts of interest, and compensation that Schwab and its affiliates receive are detailed in the Schwab Intelligent Portfolios Solutions disclosure brochures.

Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® are designed to monitor portfolios on a daily basis and will also automatically rebalance as needed to keep the portfolio consistent with the client’s selected risk profile. Trading may not take place daily.