BOW + ARRO

Targeted Musings on Financial Marketing

Locked on the Target Audience: Retail Investors

The pandemic may have temporarily shocked the economy but it can be considered a catalyst for increased market activity. Multiple rounds of COVID-related stimulus relief packages helped pump over $500 billion into US-listed ETFs throughout 2020. Impressively, one-third of the 10.9 billion daily equity trades were issued by retail investors whose collective portfolios are estimated to be worth $29 trillion. Increased retail activity has introduced a growing number of individual investors to the stock market- enough so that financial marketers should be taking notice.

Staying on top of new trends and successfully targeting retail investors can better inform AUM-growth strategies for asset managers, fund issuers and index providers. Making your fund or index stand out among the crowd and reach a retail audience requires analysis and significant research.

 

How are retail investors impacting the market?

Since retail investors make frequent, low-volume trades they are subject to paying higher fees and commissions. This has resulted in a growing catalog of digital e-brokerages and exchanges offering low to no-fee trading. Widespread adoption has minted a new wave of active retail traders that are able to buy and sell equities from the comfort of their own home on their mobile devices and tablets.

Increased retail investor access to the market is correlated to better access to information as well as education programs and trading tools. Message boards and social media have enabled the organization of viral market rallies such as coordination to drive prices and foil short squeezes. As such, these sites have become valuable online real estate, functioning as the virtual trading floor where investors can freely ask for advice, share information and consume marketing material.

Placing paid ads can drive traffic to a fund page, but having an established online presence on social media or blog can generate even more views and clicks. Building rapport within thematic groups or pages related to your fund can also help bring your fund in front of more retail investors. Plus, more users are likely to share and repost genuine content or intricately-designed marketing materials.

 

What are some characteristics of new retail investors?

The inability for retail investors to physically access the trading floor does not affect their market presence. Although they are not all market insiders, retail investors have established an enthusiastic and exciting investment ecosystem.

Unlike institutional or financial intermediaries, retail investors are more likely to invest in funds that have lower expense ratios, permitting the ability to invest in fractions of shares. The sky’s the limit for funds that receive retail investor sponsorship or support.

Increasingly savvy and trendsetting, retail investors pack a powerful punch. Thematic trends, news and product offerings that receive sponsorship or go viral within the retail investor community can result in considerable success for a fund or trust. An example of a retail trend gone viral involves the preference to allocate assets to companies that have demonstrated a clear dedication to ESG principles.

 

Be sure to see our related guide on Communicating with Retail Investors

The Bottom Line

Free trading, increased market access, a plethora of educational tools and the ability to invest in fractions of shares have increased the leverage of retail investors as a whole. Financial marketers need to pay attention to where retail investors are investing as well as how they are consuming their information. Financial marketers need to entertain and accommodate digitally savvy retail investors through viral or entertaining content. Whereas investor letters and press releases were formerly the only place to find information about a fund, now high volumes of multimedia are widely available across the Internet. As such, marketers need to stay up on trends, social media outlets, meme stocks and digital brokerage news to accurately target retail investors.