Trader Segmentation: Entrepreneurship and the Rise of the Power Trader
Report Summary
Trader Segmentation: Entrepreneurship and the Rise of the Power Trader
That U.S. active traders are rapidly aging out of trading will diminish brokerage revenue if new traders are not identified and targeted.
Boston, March 29, 2012 – A new report from Aite Group provides brokerage firms with insight into trader segments in order to boost trading activity among self-directed, online traders. Based on a December 2011 Aite Group survey of 1,014 U.S. investor households with more than US$25,000 in investable assets, the report identifies the wealth segmentation, behavioral characteristics, and investment and technology preferences of specific U.S. traders.
Online trading is well ingrained in the American psyche, but trading activity is low and decreases as traders age. Frequent traders are too small a group to constitute a strong retail trader market, and new entrants to the market are too few to make a sizeable impact on the industry’s revenue growth. Meanwhile, the marketing campaigns and online trading capabilities of large brokerage firms are overly focused on older and wealthier active investors, and this strategy may be hurting overall retail trading volumes. Properly marketing to the various U.S. trading segments requires an understanding of these segments and of tailored approaches that satisfy various asset-class investment choices, trader education methods, and demand for brokerage features.
“The challenge for the securities industry is to engage late-teen, early-20s individuals to pick up trading and become comfortable with trading frequently as they get older and acquire wealth,” says Javier Paz, senior analyst with Aite Group and author of this report. “This type of mentality shift will require a long-term commitment from brokerage firms.”
This 38-page Impact Report contains 35 figures. Clients of Aite Group’s Wealth Management service can download the report.