The Belgian financial supervisor FSMA recently published its first Retail Investor Dashboard. They are announcing a quarterly update of statistics, including the number of retail investors and their age. I guess the expectation is that the number of retail investors will go up and their age will go down, encouraged by regulatory incentives such as the Retail Investment Strategy.
Technology has greatly facilitated access to financial services, including investment services. We see many regulatory and supervisory initiatives aimed at preserving investor protection in this new context. Examples are the Retail Investment Strategy in Europe or the Advice Guidance Boundary Review in the United Kingdom. At the same time, these same initiatives are explicitly directed at being able to support an increased financial participation of retail investors. We therefore welcome them.
In this blog, we take a quick look at three components where technology is facilitating access to investment services: people, products and portfolios.
By “people,” we mean investor profiling. Technology makes it pretty obvious to move away from the standard practice of presenting all clients with the same static questionnaire. Aside from the fact that a question-and-answer approach is a poor predictor of future behavior, smashing a questionnaire on a smartphone screen is a killer for completion rates.
By “product,” we mean product innovations such as fractional shares, tokenization, or the trending Exchange Traded Funds (ETFs). Each of these potentially contributes to the democratization of investing by lowering the minimum investment, reducing fees, …
By “portfolio,” we refer to the many robo-advisors that offer a balanced selection of products based on the client’s profile. Technology can increase client engagement through new ways of interacting, ultimately addressing the emotional component of investing.
As digital transformation continues to democratize access to financial services, regulators are increasingly interested in monitoring the financial participation of retail investors. Recently, the Belgian supervisor FSMA launched a “Retail Invest Dashboard”. Interested readers can consult the first edition here: Retail investors | FSMA.
Interestingly, the dashboard distinguishes between three types of assets: stocks, bonds and ETFs. While the “ETF” category can, of course, provide exposure to stocks or bonds, it will be interesting to see if its market share grows at a similar pace as in the US. In any case, based on the chart shown below, the ETF category already seems to be attracting younger retail investors on average. A promising trend to get everyone invested!
