Recent developments in the retail investing space, including the widespread adoption of no-fee trading and increasingly streamlined and mobile-friendly platforms, have made it easier than ever to open an investing account. Despite this increasing accessibility, significant gaps remain between a widespread desire to invest among households living on low to moderate incomes (LMI)—particularly Black, Latinx, and women-led households—and actually taking advantage of this key wealth-building opportunity.
To address these challenges, Commonwealth, with support from the Nasdaq Foundation’s New Investor Initiative, launched a groundbreaking research program and pilot in partnership with three leading investing platforms—Ellevest, Public, and Stash—to gain insight into the ways in which the development of an investor identity can act as a foundational enabler for beginner investors to overcome initial feelings of doubt, discomfort, or of not belonging and fully take advantage of the wealth-building opportunities afforded by retail investing.
Our new final report presents insights from Commonwealth’s Transforming Investor Identity Project, a national observational research and one-year pilot project. This research provides a deeper understanding of the role of investor identity in facilitating participation in capital markets by beginner investors living on LMI. It introduces and explores the entirely new concept of investor identity in a way that makes it actionable for firms and relevant to broader public conversations.
About the project
For this project, Commonwealth recruited 863 participants with household incomes ranging from $30,000 to $80,000—primarily women of color—and provided them with $150 in seed funding to start investing using one of our three platform partners. The project focused on deep field research utilizing participant surveys, in-depth interviews, and observational data collected through our platform partners to track and gain insight into the development of investor identity over the course of a full year of participation.
Ellevest, Public, and Stash partnered closely with us throughout this project sharing participant data, providing regular input on our research and toolkit development, amplifying the project and research updates, and significantly adding to the communications reach of the project.
Research highlights:
- Investor identity can grow significantly during the first year and is associated with greater investor satisfaction, a higher likelihood of recommending investing to a friend, and increased deposits.
- Platforms can promote the development of investor identity by focusing on its underlying elements, including comfort with uncertainty, active learning, and connecting with others.
- Savings and representation are key influences in retaining beginner investors and creating a sense of belonging.
Companion toolkit helps providers take action
The Unlocking Investor Identity Toolkit is a companion to the report and is designed with the practitioner in mind. It can be used by marketing, product, customer success, growth, and strategy teams who would like to better understand beginner investors earning LMI and pursue interventions specific to them.
The toolkit’s solutions include varying levels of effort, from incremental, “low-hanging fruit” to new strategic initiatives. Commonwealth’s recommendations are based on research conducted as part of a national study, collaborations with fintech platform partners, and extensive user feedback sessions. This work reveals exciting insights into how investment platforms can motivate the decision-making of beginner LMI investors who are eager to activate their investor identity. The toolkit’s content is organized in sections corresponding to each stage of the consumer journey (attract, activate, and retain). We include ideas, tactical tips, and a downloadable checklist for reference.
If you are interested in learning more about this work or would like to work with Commonwealth to build a more inclusive investing system, reach out to us at info@buildcommonwealth.org