The 2020 Self-Directed Investor and Brokerage Market

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25 July 2020


The self-directed retail investor market has faced significant fundamental shifts and has become increasingly competitive. Opportunities for the industry to reinvent itself and attract new clients remain bountiful. The industry has been shaken by the race to zero commissions in the US (and in some cases Canada), which has become tablestakes, and the consolidation of Schwab and TD Ameritrade (which bought Scottrade in 2017), and the acquisition of E*Trade by Morgan Stanley. Investors’ digital proclivity and demand for personalized services have soared, and external forces, such as the COVID-19 pandemic and volatile political and market events, have had a profound global effect on investors and platforms alike. The move from low to zero commissions has encouraged firms to differentiate themselves in another way — the client experience and alternative revenue streams. Barriers to enter the financial market have been minimalized due to the digital nature of today’s environment and the proliferation of information at investors’ fingertips — the markets are no longer reserved for institutional investors or HNWI. The goal of democratizing the financial markets is becoming a reality.

Over the last decade or so, brokerage platforms have transformed from a static platform of account holdings to an interactive and engaging financial partner. The integration of toolsets for active traders, differentiating functionality, such as increased customization, charting enhancements, behavioral nudges, alerts, holistic idea-generation tools, voice-assisted trading, agile mobile trading, and paper trading, are among some of the digital features for the self-directed investor in 2020.

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 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 and goal-based planning tools.

The pursuit of digital initiatives is not new to the wealth management or brokerage market. However, the race to deliver superior digital features, trading experiences, and platforms is a driving force for today’s major market players. This is a key area for firms looking to capture assets, new investors, and retain existing clients. These initiatives encompass the digital functions that an end user sees — the UI — as well as underlying technology of the platform, such as AI-powered insights, cloud computing, open API architecture, and the strategic use of data and analytics. Celent will explore the application of emerging technology in the brokerage space and rise of generation Z investors in two upcoming reports.