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How can we better support the new wave of retail investors?

Retail investing is booming, with access to online trading and investment apps triggering a rise in non-professional investors. The pandemic has also fueled increased interest in investing, with people having more time to spare and looking to take steps to ensure financial stability. 


Young people in particular are keen to become first time investors, with 61% of Freetrade users being under the age of 35. Additionally, according to research from Finder, 75% of Generation Z plan to buy stocks and shares in the future. This interest partly derives from the access to more financial information, investment education and trading platforms than ever before, opening up easier and more accessible investment opportunities. 


What is a retail investor? 


Retail investors are non-professional investors, who invest on an individual basis with their own personal money. They generally make smaller, less frequent investments than institutional investors and invest for their own benefit, opposed to doing it on behalf of someone else. Because of this, non-professional investors are usually driven by personal goals, such as buying a home, planning for retirement or saving for their children’s education. Predominantly, retail investors will use online investment platforms, brokers or investing apps to invest. Around 33% of Brits now own shares and individuals own around 13.5% of all UK shares, illustrating that individual investors really are on the rise. 


Risks associated with retail investing 


Retail investors are usually considered unsophisticated investors, who are unlikely to have a fully rounded knowledge of the investment world. This can leave them vulnerable to losing money and being lured into making risky decisions by trading platforms. Due to the volatility of the markets as a result of the pandemic and other events, some retail investors have lost sizable sums of money because of misguided actions. 


Beginner investors can also fall victim to trading platforms offering the opportunity to be a day trader and ride the markets. However, putting retail investors into high risk, less diversified financial products leaves them open to making a loss. This misleading advice could be seen as unethical, and bolsters claims for further support for retail investors to increase understanding and ensure that they are aware of the level of risk they should be taking. 


There are many trading products available that are much more suitable for first time investors, such as index and mutual funds and exchange-traded funds (ETF) which people should be made aware of. These provide lower risk alternatives to day-to-day trading and individual stock trading. It’s clear that the appetite for investment is there, spanning generations and genders, but the guidance to meet this demand is lacking. 


Current support for inexperienced investors 

The regulator has put £11m into a campaign which targets inexperienced investors and helps them to understand the risks associated with different types of investment. The campaign came as a result of its finding that 1m people turned to high risk investing during the pandemic. It’s particularly looking to target young people through social media, where many young investors gain their knowledge on the subject. Despite this, £11m is minimal in comparison to the enormous budgets of individual platforms, and the combined marketing spend of the plethora of trading apps now available. 


Further support is needed to educate retail investors and ensure that risk is mitigated, alongside reliable and accurate information from online and social media, people need better financial guidance and even coaching, to understand investments and acceptable levels of risk. Worryingly, the FCA found that three quarters of young high-risk investors feel a sense of competition when investing money and 68% surveyed likened investing to gambling. This highlights the need for better guidance, which emphasizes the potential dangers associated with investment activity. Whilst regulators are clearly becoming increasingly aware of the need for some form of support or regulation, it’s important that people don’t have to learn the hard way, once they’ve lost money from risky decisions. 

The need for better financial guidance and coaching


The financial advice gap in the UK extends to include a lack of education around investment. As it becomes increasingly popular, particularly among young people, it’s important that there is suitable guidance available to give people the confidence to make good investment decisions and develop a smart money mindset. 


Financial coaching is one way to get investment guidance and help to prevent risky, uniformed decisions. Retail investors are usually looking to boost their journey to reaching financial goals through investing and a financial coach can help people to understand their financial situation and compile a suitable plan to reach these goals, whether this be through investment or other methods. 


Beginner investors can benefit from guidance on choosing the correct platform on which to start their investment journey. With such a wide variety of platforms and investment options now available, navigating this can be a confusing task. Platforms vary in terms of the types of investment on offer, the level of fees and service, and their target market. Retail investing platforms could even look to work with financial coaches, by connecting users with them, in order for people to fully understand the decisions that they’re making, before going ahead. 


In today’s world, people are also rightly concerned about whether their investments are ethical and sustainable. This is particularly apparent for younger investors, but also something that investors of all ages are now considering. A financial coach is able to offer guidance around investing in products that fit people’s beliefs and values, and selecting the best ethical and sustainable investment opportunities. 




Retail investing will continue to grow in popularity and whilst it’s good that investment has become something that is now accessible to all, with this accessibility comes the responsibility to support and guide first time investors to prevent them making costly mistakes. 

Platforms have a duty not to lure users into making investments that are too high risk for their financial situation, and financial coaching can help people to understand the right level for them. For many, investment may be a key part of achieving their financial goals, but getting it wrong could hinder these efforts, so seeking support is key. 



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