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Fidelity, Thrasher Fund and Cake Financial Take Unique Approaches to Serving Generation X and Y Investors

Financial firms are embracing mobile technology, Web 2.0 tools and social networking principles to reach Gen X and Gen Y.

As they continue to cater to the needs of baby boomers, many investment firms are starting to think about how to bring the next generation of investors into the fold. After all, the 60 million members of Generation X (people who are around 30 to 40 years old) and Generation Y (19- to 30-year-olds) hold about $5 trillion in assets. Wall Street & Technology spoke to one traditional firm, Fidelity Investments, and two start-ups, Thrasher Funds and Cake Financial, that are appealing to these young investors with innovative sevices.

Fidelity Phones Its Homies

Why does Fidelity Investments care about Gen X and Gen Y? "They're our future," says Joe Ferra, chief wireless officer at the firm, which targets the demographic with a Fidelity Anywhere product that provides many of the features of over a mobile device.

"The younger generation has a fondness for mobile devices, particularly the mobile phone," Ferra says. "They identify the mobile phone as something they can't live without, as opposed to Internet and TV, partly because they've figured out how to get Internet and TV on their mobile device." Today, he notes, while there are 1.2 billion TVs and 1 billion PCs in the world, there are 2.7 billion mobile subscribers worldwide.

According to Ferra, Fidelity's Gen X and Gen Y clients tend to trade more over mobile devices than do older investors. "They're comfortable using mobile devices, and they appreciate the freedom to be able to invest when they want, wherever they want," he explains. Ferra notes that Fidelity is piloting a short message service (SMS) text messaging offering that sends order-execution-notification text messages and stock-price-change alerts to cell phones. At press time, the company planned to launch the service by the end of 2007.

When developing wireless services for this demographic, Ferra adds, he keeps in mind that it collectively has a short attention span and a tendency to multitask. "We realize they may be using the device with one hand while they're walking or doing something else," he says. "You don't want to create very detailed, heavy-lifting-type applications, but provide very relevant, targeted, personalized information."

For instance, Fidelity Anywhere offers an "account snapshot," a summary of the user's account that includes balances, portfolio performance and cash available. "In a matter of seconds, you understand where you stand and how well you are performing in the marketplace," Ferra says. "It's very attractive to the younger generation to be able to take a quick peek at where they are."

Ferra points out that providing services through a mobile device is not as simple as formatting Web pages for a small screen. "This requires looking at what are the most appropriate things to offer, given the limitations of screen size and data input," he says. "It can be quite cumbersome on devices that don't have the full ... keyboard to navigate sites and use applications."

To address these challenges, Fidelity created an organization that focuses entirely on the mobile space "because we think the opportunities are tremendous in this in terms of attracting customers," Ferra continues. In addition to offering trading over wireless devices, the group lets investors monitor and manage their investment portfolios using two-way pagers, Web-enabled phones and handheld computers.

As far as which devices to target, Ferra says he's a fan of Apple's iPhone. "The iPhone ... has been a tremendous positive for the industry by making people think differently about what the phone really is to them," he relates. [Ed. note: Fidelity has built an interface to the iPhone that can be viewed at] "People are truly starting to recognize that the phone can convey a whole wealth of information. The cell phone needs to have a new name because it has so many other things built into it."

One lesson that Fidelity has learned through its mobile experience, according to Ferra, is that how information is delivered is more important than what is delivered. "In the early stages, everyone thought content was king in the mobile space -- that meant that you needed to get a lot of content on devices," he says. "Now there's been a shift and context is king -- you have to appreciate how the customer is using the [mobile] device."

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