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Young Investors Demand Top-Notch Brokerage Tools – Or Else

Today's wealth managers need to offer convenience and online tools to lure Gen-X and Gen-Y investors.

Generation X and Y investors are looking for the brokerages with the best tools and will take their money out of less-tech savvy banks and into investment firms with more robust online trading and brokerage offerings.

This was among the findings of a survey - entitled "The Race for Next-Generation Assets: Can Banks Maintain Their Lead?" - conducted by Aite Group that was sponsored by Scivantage, the financial technology provider.

"Gen-Xers and Gen-Yers have been far less loyal to their investment providers over the last few years compared to Boomer and Silent Generation investors, indicating that young consumers have yet to find their ideal investment providers," says Sophie Schmitt, Aite Group Senior Analyst, Wealth Management. "Banks seeking to maximize their ability to retain and grow share of wallet with young investors should work on growing their online investing capabilities and providing more convenient services."

Some of the survey findings include:

- 40 percent of young investors still consider a bank to be their primary investment provider. By contrast, only 20 percent of young investors consider an online brokerage firm to be their primary investment provider despite their strong adoption of online trading

- 44 percent of Gen-X and Gen-Y investors surveyed shifted assets to another investment firm or switched investment providers due to availability of online tools

- 42 Percent of Gen-X and Gen-Y respondents said their bank would need to offer more convenient services and/or more robust online brokerage/trading capabilities in order for them to move more assets to their bank

- About 30 percent of young investors trade more than 25 times per year and slightly less than 70 percent trade online more than five times per year

- The No. 1 reason clients shift investments to another firm is fees, such as those tied to accounts, financial advisory and asset management

"Online investing capabilities are now second nature to Gen-X and Gen-Y investors and will be a requirement for banks that want to attract future high-net-worth or current affluent members of this segment," says Chris Psaltos, vice president, product management, Scivantage. "As younger, tech-savvy investors look for greater control of the investment decision-making process, wealth management firms, particularly banks, must ensure that their online investment platforms are keeping pace with the latest consumer technology innovations."

This report is based on Aite Group's December 2011 survey of more than 1,000 U.S. investors who hold a minimum of $25,000 in investable assets and have access to online trading capabilities. The sample is representative of approximately half of the U.S. population, according to a Scivantage press statement.

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio

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