In the last year, brokerages like Fidelity, Charles Schwab Corp., and Robinhood Markets Inc. attracted millions of new investors. Consequently, Fidelity’s staff is set to increase by more than 22 percent this year, to over 60,000 employees, including the current onboarding. Evidence showed that new retail accounts grew by 1.7 million, up 39% from Q2 2020; however, the challenge for Fidelity is to convert day traders into long-term customers. Indeed, the conditions that drew in new younger investors last year have persisted into 2021, burdening contact centers, trading platforms, and websites that answer clients’ inquiries and execute transactions.
Commission-free stocks
Individual investors have transformed the fortunes of the brokerage business as a result of the market’s rise. Many businesses now offer no-commission stock transactions and low-fee investment funds, which have attracted a large number of new clients. Geode Capital Management Inc is a significant component of its strategy to reduce investment expenses across all of its operations. It has aided Fidelity in regaining ground lost to Vanguard and BlackRock Inc., both of which specialize in passive investment. Thus new investors have whittled profit margins for money managers, forcing them to compete on pricing. Traditional products, such as mutual funds that choose stocks and bonds, have been bleeding money from clients. Fidelity and some of its competitors are willing to make this trade-off since costs for processing each transaction fall as more transactions are processed on their systems. These companies are also wagering that many of the new account holders would eventually upgrade to more expensive services, such as financial advice, in the future.
Big data
Whatsmore, Fidelity is looking to its collection of internal data and behavioral science, as the asset management behemoth prepares the groundwork for systematic funds when it comes to gaining a competitive edge. The company, which manages $4.2 trillion in discretionary assets, keeps extensive records on trading activity, analyst ratings for stocks and bonds, the circumstances surrounding investment decisions – and the results. Finally, better access to onboarding and stock trading expands the growth of firms like Fidelity, which can ultimately maximize its data on retail investors to convert them to more profitable services as its ultimate goal. [coinbase] [robinhood]
