Finra Study Finds New Investors Younger, More Diverse, Earn Less

A new study from Finra found that 2020 brought a surge in retail investors who entered the markets using taxable, non-retirement investment accounts via online brokers. The FINRA Investor Education Foundation and NORC at the University of Chicago surveyed 1,291 households between October 26 and November 13, 2020, and found that these new market entrants skewed younger, earned lower incomes, and were more racially/ethnically diverse than experienced market entrants and previous account holders. A report in InvestmentNews highlighting the survey noted that the growing interest in stocks might mean more clients for firms in coming years and that financial institutions may need to reconsider their pricing models and client experiences to address the needs of these new market entrants. Some findings from the Finra survey:

  • Among investors who opened a new account in 2020 in the sample, 66 percent were new investors who had not previously owned a taxable investment account, making this their first experience with this type of account and almost two-thirds (66 percent) of new investors were under age 45.
  • The plurality of all investor groups (37 percent) earned an income of $100,000 or more. However, 45 percent of experienced entrants and 41 percent of previous account owners earned $100,000 or more, while only 28 percent of new investors earned that amount. Additionally, 24 percent of new investors earned less than $35,000.
  • While the majority of investors in all three investment groups were white, new investors were more diverse. Indeed, the largest proportion of African American (17 percent) investors were new investors, and there were more Hispanic/ Latino investors in both the new investors (15 percent) and experienced entrants (17 percent) groups.
  • New investors held much lower balances, in general, when compared to the other investor groups. More than twice as many new investors held account balances less than $500 (33 percent) when compared to experienced entrants (16 percent), and more than five times as many when compared to previous account owners (6 percent).