Targeted Musings on Financial Marketing

Communicating with Retail Investors: A Primer

09 Nov 2020

Although retail investors are among the least sophisticated of the three major categories of financial audiences (the other two being financial advisors and institutional investors), they represent an extremely lucrative and important target audience for many ETF issuers. The retail investor market in the United States consists of as many as 50 million households by some estimates, and 401(k)s and similar investment accounts are held by up to half of all workers. So it’s clear that communicating effectively with this segment of the investing public can be hugely advantageous for investment funds looking to boost AUM.

So what can ETF issuers do to communicate better with retail investors? Read on to find out.


Grab your audience and don’t let go

The common refrain in marketing, that attention spans are shrinking all the time, holds just as true in finance as it does in other industries. In other words: cut to the chase. Even if you have some extraordinarily complex material to communicate, retail investors may never make it to the important part of what you have to say if you don’t first hook them in the first couple sentences of your piece of content. Grabbing your audience is often best accomplished with a thought-provoking question or attention-grabbing factoid. By ending this portion with a cliff-hanger, you can spur the reader or recipient of your content to continue.

Be sure to also see the 3 Ways ETF Issuers can Utilize Animated Videos 


Move from simple to complex

This is an absolute fundamental principle of financial marketing, the star around which all other financial marketing imperatives orbit. If you cannot move from simple to complex when communicating with retail investors, you’re in deep trouble, because they simply will have no idea what you’re talking about. As straightforward as this approach might sound, it does not come naturally to most financial professionals, often because they spend their time interacting mostly with other financial professionals who understand the “inside baseball” of financial terminology that retail investors will typically find opaque.

For example: how sure are you that any given retail investor knows what “market cap” means, anyway? Did you know that many ordinary investors still don’t even know what “ETF” stands for? For complex ETFs that lean heavily on terms such as “smart beta,” “alternative weighting methodology,” or “factors,” it’s worth recognizing the shaky state of financial literacy in the United States (which has taken a nosedive since the Great Recession), and to proceed slowly, so as not to lose the target audience.

By using simple terminology as building blocks before moving onto more complex financial concepts, you’re giving retail investors time to digest what you’re telling them, while also leading them along the educational route so that they eventually understand the product enough to feel comfortable making an allocation.


The Bottom Line

Retail investors are a coveted demographic in the ETF industry, and for good reason—they represent a huge swath of the investing public and can in many cases make or break a fund. But it’s important to keep their level of financial sophistication in mind if you really want to capture their attention, educate them, and eventually convince them to make an allocation to your ETF.