Retail Investor Trends: Insights from Broadridge’s Investor Pulse

What can retail investor behavior tell us about today’s markets? In this episode of the SIFMA Podcast, Heidi Learner, Managing Director and Director of Research at SIFMA, speaks with Andrew Guillette, Vice President at Broadridge, about insights from Broadridge’s Investor Pulse.

Transcript

(Edited for clarity)

Heidi Learner: Hello, and thank you for joining us for this episode of the SIFMA podcast. I am Heidi Learner, Managing Director, Director of Research at SIFMA, and your host. Today, we will be discussing the Broadridge Investor Pulse.

I’m pleased to be joined by Andrew Guillette, Vice President at Broadridge, a global fintech leader providing critical infrastructure and data solutions powering investing, governance, and communications across the financial services industry. He leads Broadridge’s Investor Pulse, a proprietary research platform that analyzes the investment holdings and activity of millions of retail investors to deliver real‑time insights into investor behavior and market shaping trends.

As always, we welcome your comments and questions; listeners can reach us at digital@sifma.org. And with that, let’s dive into the discussion. Andrew – thank you so much for joining us today. What is Broadridge Investor Pulse, and why was it created?

Andrew Guillette: Investor Pulse is Broadridge’s view into what retail investors are actually doing, and not what they say they might do. For a long time, the industry has relied heavily on surveys and assumptions, and so we built Investor Pulse to ground those conversations in real behavior. It tracks actual holdings, an activity of 51 billion retail investors, it’s built from Broadridge’s investor communications and proxy business, and it gives us visibility into more than 90 percent of assets sold through intermediaries. It’s also publicly available, so it’s free, which makes it an amazing industry resource.

In terms of what’s included, it’s taxable accounts and IRAs, by vehicles it’s mutual funds, ETFs, and individual equities, so stocks, and we’ve been at it for 8 years. So we have 8 years of anonymized and aggregated history and it’s refreshed monthly. We track billions of data points across dimensions of generation, wealth, product usage, and more. It’s a very rich data set. It doesn’t include workplace investing, so no 401K and no 403b, and it’s not a survey. So, no sentiment or predictions. But, for purposes of our dialogue today there are places where I might reference some of our own semi-annual surveys of investors and advisors to understand the why behind certain behavior. So, I hope that gives a better sense as to why Investor Pulse is such a powerful tool to understand what’s really happening with retail investors.

Learner: Very helpful, and it’s always great to have real-time data as you mentioned, rather than sentiment indices. As you’ve worked with the Investor Pulse dataset, what are a few of the findings that genuinely surprised you — or that might surprise our listeners — and what are the implications?

Guillette: So, here let’s challenge some assumptions with real data. And a nod to the TV show of the early 2000s, we can think of these as myth busters. So, for myth number 1 a common belief might be that highly educated investors earn better returns. Well, in reality, education doesn’t drive better returns. In fact, the data shows that returns are very similar across education levels. While higher education does translate to more assets, it doesn’t lead to better performance. So the implication, investing outcomes are more linked to behavior in asset class exposure than the credentials.

Let’s consider another myth, that self-directed investors are mostly young, when in reality they’re only about 4 years younger than advised investors on average. So about 53 vs. about 57 years old. I think the implication here is that self-directed investing is mainstream, and it’s not just generational-specific. Quick survey tie-in, we were just talking about self-directed, and we survey 1,000 retail investors and I’d like to add a little bit of color here about self-directed investors. So, the survey shows that 55 percent report having a self-directed account, and most began investing prior to the pandemic. Overall, users tend to be male, have higher incomes, and use them to buy stock. We also see the adoption of AI for investment decision-making in these accounts, especially among younger investors. So to sum up, I think the message is pretty simple; outcomes are driven less by who investors might look like on paper and more by how they behave. Which has meaningful implications for firms around product design, advice models, and investor education.

Learner: Very interesting. When people hear about “democratization of investing,” they might assume everyone is benefiting equally. What does the data show?

Guillette: Sure, I think we need to reframe that a little bit here, in that democratization is certainly a major theme that we track with Investor Pulse. We are seeing broader participation, but that doesn’t necessarily mean equal outcomes. While the last 5 years has seen an uptick in mass market investors from 15 to 18 percent, we also see wealth concentration increasing, where the wealthy are getting wealthier. High-net-worth investors now account account for 70 percent total asset share, up from 64 percent at the end of 2020. So, while more people are investing, asset concentration is still very real.

We’re also seeing generational participation at the edges. We’ve got a steady stream of younger investors entering the market. Gen Z now accounts for 7.6 percent of all investors. That’s nearly triple that of just 5 years ago. And a number have now surpassed the silent generation, which is the oldest investor group. That’s a powerful signal of younger investors entering the system. What’s surprising is that despite this momentum, only about a third of industry leaders say that younger investors are a growth priority. So there is a mismatch between where participation is heading and where firms are focused. But firms need to balance the lower asset levels of today, so for example, Gen Z median assets of 6 thousand and millennials 21 thousand, firms need to balance the lower asset levels of today with the longer-term payoff of engaging these younger investors before their wealth arrives.

Finally, a quick note on education. Investing is becoming more democratized there, too. About 52 percent of investors now have a high school education now as their highest level. So, more than half of all investors have high school education as their highest level of education, which might surprise some, and that share has actually grown since the pandemic. At the same time, education still shows up in asset accumulation. So investors with graduate degrees hold a median of 162 thousand and this is more than 5 times than those with a high school education. So, while education might not drive returns, as we mentioned in the myth buster, it does correlate with wealth. I think the bottom line here is that democratization is expanding who’s investing across generations and education levels, but it hasn’t flattened outcomes. Wealth is still concentrated at the top.

Learner: Interesting. When we talk about some of these differences by demographic characteristics, we heard some of the differences in terms of wealth distribution and age. What is Investor Pulse telling us about how investor preferences are shifting among product types — and what’s driving that change?

Guillette: Well, I see the headline here is equities, so individual stocks are now the number 1 holdings in investors’ taxable portfolios at 39 percent a share.

By comparison, the mutual fund share has eroded significantly; it’s down to 33 percent. While ETFs at 27 percent has grown the fastest. And by way of ownership, more than 1 of every 2 investors now holds ETFs and equities. This is a pretty broad-based change, and it’s not limited to only one type of investor. So we do see the mutual fund erosion across all wealth segments and across all generations. While the product tide has clearly turned, mutual funds are far from irrelevant. They do remain a core vehicle, especially for boomers, and they do hold the highest median account balance, about 54 thousand, which is roughly double that of ETFs and Equities.

While mutual funds are still a massive 31 trillion dollar marketplace for retail investors, the real growth is in ETFs. From a flow standpoint, both passive and active ETFs are witnessing strong inflows, while mutual funds, by contrast, are seeing similar mirror image outflows. Active ETFs are especially attractive because they combine professional management with lower cost and efficiency, and as a result, adoption has accelerated.

Today, 1 in 4 investors owns an active ETF, roughly 4 times the level we just saw 5 years ago, and their share of assets has grown even faster, more than quintupling, almost 6 percent. We expect this momentum to continue. In our survey to financial advisors, active ETFs rank as the number 1 product they plan to allocate more assets to over the next 2 years. In fact, more than 4 in 10 advisors told us they expect active ETFs to replace most, if not all,l of their mutual fund business within the next 3 years. At the end of the day, I don’t think this is a passive vs. active story; it’s more of a structural story and is driven by investors’ demand for flexibility for transparency, and tax efficiency, and it’s this structural shift that is really reshaping portfolios faster than many expected.

Learner: We’re seeing some of that in our own research to with more than 1 thousand ETFs launched last year alone, so that’s not surprising that your data reflects the shift. When we look at Investor Pulse, what does it reveal about how investors are balancing professional advice with do‑it‑yourself strategies today?

Guillette: Perhaps the biggest misconception is that investors are choosing between advice and self-directed. What we see is a blend of both. Investor Pulse tells us that 13 percent of investors have relationships with both advisory and discount firms, while our surveys tell us that it’s even more, it’s probably about double this amount at the account level. So this tells us that investors are intentionally segmenting how they invest. We firmly believe advice still reigns; it accounts for just over 75 percent of assets under management and with median assets of 66 thousand whic is more than twice that of self-directed, but the mix is still shifting.

Self-directed usage is growing steadily by about 1-2 percentage points a year. So, it isn’t a replacement story; it’s really more of an evolution. Self-directed popularity holds across all generations and all wealth segments, not just for the younger or smaller investors. I think some of our listeners might be wondering why do investors hold both types of accounts? Well, we’re gonna bring in our survey here, our survey tells us the number 1 reason for having both accounts is diversification, and this is especially true among women. Another top reason, formerly number 1, now number 2, is the enjoyment of investing. This shows up more strongly among men. So self-directed investors, or accounts rather, often serve a different purpose than advised ones. Even among investors with both account types, they’re more open to consolidating 100 percent of their assets with their financial advisor than 100 percent of their assets on the self-directed platform. I think the takeaway here is that trust still sits with the human relationship and that self-directed behavior isn’t a threat to advice; it’s more of a cue for how advice needs to evolve.

Learner: So, can I conclude that the industry won’t be taken over by AI bots? That there is a place for both advisors and self-directed accounts?

Guillette: There’s absolutely a place for both, and I think that financial advisors just need to understand whether their clients are holding a self-directed account at another platform or within their own firm; they just need to have an open dialogue around that. But, yes, trust still remains with the financial advisors.

Learner: Right. When you consider all the themes put together, so a little bit of everything we discussed today, what should our audience remember most?

Guillette: Right, well, there is certainly a lot to digest, perhaps the biggest thing to remember in my mind is that retail investing today is more nuanced than the stereotypes might suggest. Investors aren’t monolithic, behavior varies by wealth, generation, product choice, and advice model. That’s why assumptions break down so quickly. In this environment, clarity becomes a real competitive advantage. I do think we’ve been kind of in the dark ages in terms of understanding the end investor, but now entering an age of enlightenment of sorts, and firms that understand what investors own and how they behave are better positioned to grow and retain assets, and that’s really what our industry is all about. That’s exactly why we made Broadridge Investor Pulse publicly available. Again, it’s a free resource designed to help anyone answer real questions about retail investors with real data. So, when your listeners have a question around investor behavior, we certainly hope Broadridge Investor Pulse will be one of the first places they look.

Learner: Absolutely. Thank you so much, Andrew, for your thoughtful insights and discussion today, and thank you all for tuning in. Details on Broadridge’s Investor Pulse are available at investorpulse.broadridge.com. To learn more about SIFMA and our work to promote effective and resilient markets, please visit www.sifma.org.

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