There’s a new breed of investor on the rise, spawned during the height of the pandemic, when home-bound investing became the new “thing.” A new generation of tech-savvy investors boldly charged into the market, eager to learn and ready to dabble.

These new customers may be characterized by their propensity to self-serve using online platforms and their lack of fear when it comes to complex financial instruments, such as options. With an estimated $68 trillion expected to move from baby boomers to millennials over the short haul, the opportunity exists for firms to reimagine their brokerage models around modern functionality, intuitive risk analytics and holistic financial advice (including tax advice), to attract and retain new clients. In essence, brokers will need to start acting the way all wealth management firms do, with a platform equipped to buy and sell securities.

The road to an evolved investment environment

The best starting place is to consolidate tech infrastructure for operational efficiencies. FIS’ 2021 Readiness Survey found 40% of brokerage respondents willing to prioritize operational efficiencies, with 38% focusing on IT consolidation across fewer, but more strategic, tech vendors.

With a strong digital ecosystem in place, brokers can attain significant long-term strategic value. The DTCC’s proposed two-year road map to shortening the settlement cycle to T+1 will strain systems and should encourage firms that have not upgraded or consolidated. With the basic infrastructure requirements in place, firms can then make the next transition to advanced technologies, such as machine learning and artificial intelligence, including cloud- and SaaS-based systems.

These systems combine to enable seamless remote work, something 46% of brokerages in the FIS Readiness survey said would be a challenge next year. As well, as regulators ratchet up requirements around the security of customer data, during a time when attempted and successful attacks are on the rise, firms that ignore or delay upgrading to at least the bare minimum expose themselves to serious fines and reduced trust from current and potential customers.

In summary, the pandemic showed that brokers now have the tools and capabilities to rapidly transform. Those that do will find new business models available that enable them to thrive in today’s newly evolved investment environment.

NOTE: The full version of “Broker 2.0: It’s Now or Never for Firms to Stay Relevant and Avoid Extinction” appeared first in Traders Magazine on August 13,2021.