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FINRA Survey: New Investors More Likely to Seek Financial Advice

According to a recent report from the Financial Industry Regulatory Authority, new investors are more likely to seek the advice of financial professionals.

In 2020, the FINRA Investor Education Foundation and NORC at the University of Chicago fielded a survey to “better understand” the influx of new investors who opened taxable investment accounts for the first time during the early months of the COVID-19 pandemic and how they compared to experienced investors who already held taxable accounts but opened additional accounts.

The report says new investors exhibited a shift away from the use of “other personal research,” by almost 10% compared to 2020, and exhibited a greater reliance on financial professionals by 9.3%. In fact, 33% of new investors say they are relying more on financial professionals compared to just 23% in the 2020 survey.

The study also says the majority, 78.9% of investors, both new and experienced, who opened new accounts in early 2020 are still in the market two years later.

“[It’s] suggesting that the observed expansion of investors in 2020 was not merely a temporary uptick related to the pandemic or market conditions, but a durable rise in the investing population,” according to the report.

The study shows that although a greater proportion of “Experienced Investors” maintained their new accounts, 88.6% compared to new investors at 75.2%, it is worth noting that a sizable proportion of new investors did not know if their accounts were still open, 15.6% compared to only 4.7% of experienced investors.

Family and friends remained the second most likely source of investment advice at 35% after research from annual reports and company websites claimed first by 37%.

In general, new and experienced investors responded more positively to digital platform features that allowed them to learn (70% found it helpful), customize or personalize the user interface (57% found it helpful) and receive free cryptocurrency or stock when opening an account (57% indicated that it enhances their experience).

Conversely, investors were much less enthusiastic about games of chance offered when using an account (35% indicated that it detracts from their experience), the ability to select an avatar (29% indicated that it detracts from their experience) and the ability to link the user interface to social media (32% found this unhelpful).

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