Going into 2014, female and young investors will be taking further control of their financial plans.
The migration from investment advisers may be the result of a new type of investor. According to a new report from Celent, the self-directed market grew 5% last year. By 2014, active investors and active traders will make up 43% and 6% of the total U.S. self-directed market, respectively, the firm said.
The Boston-based research firm found that more women are also opening self-directed accounts. While the active trader segment will remain male-dominated, by 2015 females will approach 12–15% of active trader accounts, the report noted. Investors are also trading more frequently.
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"The self-directed market never stays still. There have been a number of changes over the past 18 months. Some of these developments, such as the increasing number of women in the market and the gradual rebalancing away from traditional investors and toward active investors and traders, are continuations of existing trends," said Alexander Camargo, analyst with Celent's Securities & Investments Group.
Other trends include mobility and social media becoming legitimate channels among online brokers, Camargo noted, adding that HTML5 and more advanced, cloud-based trading platforms are just beginning to have an impact.
The average age of the active trader is creeping up, according to the report. Layoffs in the financial services sector have left middle-aged men with knowledge of the markets who are too young to retire seeking income, Celent pointed out. As a result, they are actively trading.
In response to an increase in investors taking the self-directed route, a number of online trading firms have emerged that specialize in options and equities trading on one platform, the report showed. Other firms have released newly rebranded and enhanced active trader platforms.
Celent also found that the larger online brokerages have been focusing extensively on retirement and managed account products. Firms are also emphasizing hybrid models in which investors can contact an adviser for portfolio analysis, the report noted.
David Foster, vice president of asset accumulation sales for CUNA Brokerage Services Inc., said the advisory council for the subsidiary of CUNA Mutual Group to ensure he broker is staying current on credit union and member needs.
Foster identified a new type of investor: the validator. "They want mobility and access to their accounts from tablets or online so they can do comparison shopping. They want to be able to validate what they're seeing."
CUNA Brokerage's credit union advisory panel found that Gen Y and millennials, which by some estimates make up 80 million of the U.S. population, are in their peak borrowing years. Foster said in particular, credit unions are very interested in courting Gen Y because of their heavy reliance on mobile and other technology-based interaction. One way to attract this group is by offering choices like self-directed options linking to a call center and face-to-face interaction.
As bank brokers continue to restructure their wealth management businesses to complement more nuanced segmentation, online trading becomes a pillar of these strategies, said Isabella Fonseca, Celent research director and co-author of the report.
"These banks can leverage existing infrastructure and business lines to build a hybrid service model. This model will likely include online trading, plus in-branch representatives and call center PINs for investors seeking simple guidance," Fonseca said.
Foster continued with that point, "All of the different groups are getting more involved in social media and technology so I don't want to say it's just Gen Y or millennials. Credit unions can see this as a future lending opportunity with the online or self-directed option as a hook." n
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