Why Trade Simplification Appeals to Younger Users

3 mins read

Listen to this article:

The stock market is relatively simple nowadays. At least in terms of getting involved and trading. While the intricacies of choosing the correct stock and buying or selling at the right time can be more complex than ever, the actual process of getting into the market and trading has only gotten easier.

Of course, this simplification of trading is partly due to the rise of mobile phones. Our phones keep track of everything from our finances to our schedules, so it only makes sense that we can manage our stock trading from there. 

However, only the younger generations are notably getting involved with this simplified trading. Older generations are still sticking with their traditional trading methods, at least according to Adam Nasil, head analyst at Broker Chooser.

The Rise of Trading Apps

Nasil finds that while older brokers such as Charles Schwab have much more senior and wealthier clients working with them, Millenials and younger generations are shifting to platforms like Robinhood due to their accessibility. 

Working with Charles Schwab might consist of speaking with various trading experts and paying them to organize and manage one’s portfolio. Younger generations may struggle to afford such services, leading them to stick with free platforms like Robinhood. Nasil and his firm note this discrepancy with a few key statistics.

The average account size on Robinhood is only $4,000. An average Charles Schwab account size is closer to $245,000. These numbers correlate with average age groups as well. The average Robinhood trader is around 31 years, while 50-year-olds are the norm with Charles Schwab.

“Newcomer brokers usually have a significantly bigger customer base than some established brokers. Robinhood has around 23 million users, while Webull has more than 7 million users. Interactive Brokers and most European brokers have less than 2 million users,” Nasil adds.

In a move to capture the younger audience, Interactive Brokers, a company focusing on older professional customers, has launched a mobile application. Interactive Brokers currently serves an average age group of 42 with an account size of around $223,000.

A Crypto-Powered Future

Now, it’s easy to say that mobile access is the main reason for younger traders getting into trading, and that’s true in part. But it’s also worth noting the options available on these applications. Most notably, platforms like Robinhood might be attracting younger investors due to crypto accessibility.

Right now, anyone can create a Robinhood account and start trading crypto with a minimal investment. While more serious traders might eventually move away from Robinhood to a crypto-focused exchange over time, there’s no denying that mobile services serve as a gateway to more significant trading.

Nasil notes that while 59% of retail investors in the US are focused on trading stocks, 9% of traders are primarily focusing on crypto as of 2021. In 2020, the number of crypto-focused users was only 4%.

“The competition of stock and crypto trading is also getting more intense not just between brokers, but between brokers and crypto exchanges,” Nasil notes. 

“Brokers started widening their crypto offering, e.g. Robinhood launched its beta version of a crypto wallet, while crypto exchanges also plan to offer real stock trading. Interactive Brokers’ launch of IBKR GlobalTrading App also highlights this trend as US customers can trade spot crypto on this new app.”

This isn’t to mention that mobile platforms such as Robinhood tend to ‘gamify’ the trading experience. For example, the app provides a video game-like ‘success’ screen when making one’s first trade or will give home screen prominence to volatile, popular stocks as if they’re winning some sort of competition.

Whether or not the gamification of trading is morally corrupt is up to the user, but we cannot deny the method’s success. It tends to lighten the often daunting trading experience, which can appeal to younger traders who are still learning the ins and outs of money. 

You may also like

Recent Articles