A combination of the pandemic and booming cryptocurrencies is reshaping the investing landscape in America. Younger investors are preferring to manage their own money than turn to financial advisors like their parents have.
Platforms like Robinhood exploded during the pandemic when people had nothing better to do than sit at home and pump their stimmys into meme stocks like GameStop. Robinhood has over 22 million users (per S-1) and despite all the notoriety surrounding it, is quick and easy to use.
Many young investors also want to invest in cryptocurrencies and tech startups that mainstream advisors do not offer. Cryptocurrencies have exploded over the last year. Bitcoin is up 4x, Ethereum is up 10x and other altcoins (Shiba/Solana/Doge etc.) many multiples of that. The traditional investing portfolio (stocks and bonds) is "boomer af" according to many millennials.
About 70% of households with a net worth of $500,000 or more headed by a person under 45 had an investing style that was either strongly or mostly self-directed in 2019, up from 57% in 2010, according to an analysis of Federal Reserve data by research firm Aite-Novarica Group.
Big firms are not giving up and betting that young people will hire financial advisors when they are older: "When you start to go from the wealth accumulation phase to the retirement phase, the world gets much more complicated, people don’t think they need advice until they need advice," said Jed Finn of Morgan Stanley.
Short Squeez Takeaway: Gone are the days when people were happy with 10% annual returns. Young investors want to get rich quick and make multiples of money in a year, and are also willing to invest in riskier assets. In a world full of stories of people becoming overnight millionaires by investing in an ape NFT or a dog cryptocurrency, financial advisors might have a hard time wooing these degenerate traders.