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THESE ARE THE SHIFTING DEMOGRAPHICS OF RETAIL INVESTORS


A NEW STUDY OF 40 MILLION AMERICANS NOTES DRAMATIC SHIFTS IN HOW AMERICANS
INVEST, FROM THE RISE OF SELF-DIRECTED INVESTORS TO A CHANGE IN ALLOCATIONS.

By Holly Deaton
May 22, 2024
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(Bigstock Photo)

According to a new study by Broadridge Financial Solutions, a financial
technology company based in Lake Success, New York, the way U.S. investors
allocate their money and even what they look like has changed.



The company analyzed “de-identified share ownership data” from its proprietary
businesses, which consisted of billions of data points from over 40 million
Americans invested through financial intermediaries such as broker-dealers,
RIAs, and online platforms. Broadridge also analyzed exchange-traded funds,
closed-end funds, open-end mutual funds, and U.S. equities held in taxable
accounts and IRAs in the years from 2018 to 2023. It is Broadridge’s largest
study to date and is six years in the making.



The company found that self-directed investing was on the rise, with nearly 31
percent of all investors allocating to online discount brokerage platforms
compared with 19 percent in 2018. Conversely, usage of advice channels such as
RIAs, broker-dealers, and wirehouses fell from 90 percent in 2018 to 80 percent
in 2023.



However, this does not necessarily spell bad news for advisors, said Broadridge.
About 11 percent use both channels, and younger investors who’ve started out as
self-directed will likely eventually seek out advice.



“Asset managers, distributors, and advisors should just understand the needs,
wants, and desires of the underlying investor and the changing demographics,”
said Andrew Guillette, vice president of global insights at Broadridge. “The
newer, younger investors that will inherit the wealth down the line, their entry
point for many has come into the self-directed part of it.”



Broadridge also found that despite a common sentiment that self-directed
investing is for the less affluent, high-net-worth investors actually leaned
more heavily on self-directed investing (about 25 percent) compared with the
mass market (18 percent) or mass affluent (20 percent). Overall, investors have
increased the percentage of their assets held via online brokerages from 14
percent in 2018 to 23 percent in 2023.



In self-directed investing, Gen-Z, millennial, and Gen-X investors are more
prolific. According to Broadridge, the younger generations have collectively
increased online assets 9 percentage points to 36 percent.

Millennials in particular have taken a larger slice of the pie, with the total
percentage of millennials participating in self-directed investing jumping 9
percentage points from 13 percent in 2018 to 22 percent in 2023. Conversely,
baby boomers fell 9 percentage points.

The rise of self-directed investing wasn’t the only investing shift noticed by
Broadridge. According to the study, women investors now have higher median
assets ($52,105) than male investors ($50,271), and their median age is three
years older. However, men still account for more than half of investors (51
percent) and controlled 55 percent of assets in 2023, up slightly from 54
percent in 2018. According to Guillette, the data shows a large influx in young
male investors in 2020.

“We certainly saw through the pandemic, people had time on their hands, they had
PPP money,” said Guillette. “It was the gamification of investing, low interest
rates and frictionless, seamless trading at effectively zero cost that brought a
lot of folks into the marketplace for democratization.”

The share of investors without a college degree is now more than 50 percent,
having first met that benchmark in 2022 and then having risen to 51 percent in
2023. However, their median assets remain far below investors with a college or
graduate degree. Investors with a high school degree had a median asset total of
$28,332, compared with $73,044 for those who completed college and $148,399 for
those who completed grad school.

Following their fall from favor in recent years, mutual fund assets dropped
below equity assets within individual investors’ portfolios for the first time.
According to Broadridge, the percentage of investors who owned mutual funds fell
from 72 percent in 2018 to 62 percent in 2023. As a total allocation, mutual
funds fell from 53 percent in 2018 to 38 percent in 2023. The corresponding
allocation to equities rose to 39 percent from 29 percent, and the allocation to
ETFs increased to 23 percent from 18 percent.

Baby boomers held the highest allocation to mutual funds (39 percent). Ownership
in equities rose among younger investors. Gen Z doubled their holdings of equity
assets to 0.4 percent in 2023 from 0.2 percent in 2018, millennials more than
doubled their equity assets to 6 percent from 2 percent, and Gen X increased
their assets to 24 percent from 16 percent.

Guillette said that it’s important that advisors pay attention to the changing
demographics in order to better serve their clients. “U.S. investors want a
personalized experience,” he said. “And so, one needs to understand the nuances
and the segmentation in order to personalize it.”


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