Hargreaves Lansdown Group  

The rise of the young investor has come with big risks

The rise of the young investor has come with big risks
Credit: Ivan Samkov via Pexels

Hargreaves Lansdown may have been drawn into a legal action over the collapse of the Woodford Equity Income Fund, but amid the heightened interest personal finances since the pandemic started, the D2C platform has been leading the way with new customers.

Last year Hargreaves gained a record 220,000 new customers, and in the year to September 30 2020 AJ Bell reported that 63,000 customers joined its platform.

Excluding those that have been added as a result of its acquisition of the Share Centre, Interactive Investor gained more than 40,000 new customers, which is more than double its new customers in 2019, its trading update figures show.

The pandemic is breeding a new generation of active and purpose-driven investors in their late 20s and early 30s who are keen to do more and do good with their money, according to a study by Nutmeg. 

The research on the impact of the Covid-19 pandemic on consumer attitudes towards money and investing – based on a survey of 2,000 people across the UK – revealed that those aged 25-34 are set to emerge from the pandemic feeling wealthier, more financially confident and determined to use their money to do good, more than any other age group. 

The pandemic is also leading to significant shifts in the attitudes and behaviours of young adults towards their money. Of those 25-34 year olds that hold investments, 60 per cent have put more money in investments over the past year, compared to 38 per cent of the population. 

Kat Mann, head of PR and savings and investment specialist at Nutmeg, says: “Even if [over the past 12 months] you have been fortunate to have kept a job and to have been financially better off, the reality is the landscape and environment means we are very aware of that need for a rainy day fund.”

In its annual results for the year to September 30 2020, Andy Bell, chief executive of AJ Bell, said the D2C platform market in UK – estimated to be worth £210bn – saw accelerated growth in 2020.

And compared to five years ago, today’s new customer is typically a younger, less experienced investor who inevitably has a smaller portfolio to begin with. 

Platform offerings

So what do these platforms offer to younger investors and are there emerging risks to be aware of?

According to AJ Bell, more and more of these clients want help and guidance as they begin their long-term investment journey and are likely to engage with their investments using a mobile device.

Bell said: “While this is another trend accelerated by Covid-19, we have seen this as being the direction of travel for a number of years; evidenced by our strategy of providing a range of guided investment solutions to help customers invest, and focusing on making our platform easy to use, both on our website and via our mobile app. 

“We see no sign of this trend slowing and will continue to focus our efforts on delivering an easy-to-use platform offering a range of guided investment solutions and a first-class user experience across all devices. This will ensure we remain well positioned to capture an increasing share of the D2C market.”