Commonwealth’s “Transforming Investor Identity” research project, supported by the Nasdaq Foundation, provides first-of-its-kind, actionable research designed to transform the investing system by making investing more inclusive.

Following more than 850 individual beginner investors earning low to moderate incomes (LMI) for 12 months on three leading financial platforms—Ellevest, Public, and Stash—the research unearths what attracts, motivates, and sustains new investors so they will feel welcome in the wider investing community. This development of an “investor identity” enables new investors to overcome feelings of doubt or discomfort and take full advantage of the wealth-building potential of capital markets—a critical step in closing racial and gender wealth gaps.

This research is truly transformative because it removes the ‘hypothetical’ from the discussion. The Investor Identity project reveals the influences that motivate or conversely demotivate new investors, particularly those from underrepresented populations, through their actual participation in capital markets. The real-world insights contained in this research and made actionable in the Unlocking Investor Identity Toolkit offer a solid blueprint for the financial services industry to make investing more accessible and thereby more equitable for everyone.”

 Timothy Flacke, Co-Founder and Executive Director, Commonwealth.

Identity As a Missing Link to Sustained Participation

In recent years, technology has expanded access to individual investors—but the gaps remain stark, particularly for Black, Latinx, and women investors. The Transforming Investor Identity Research Project investigates the development of investor identity, exploring the factors that influence its development across multiple platforms. This research followed and surveyed 863 beginner investors as they invested $150 in seed funding and their own contributions over one year on one of three retail investing platforms.

Commonwealth’s 2021 research, also supported by the Nasdaq Foundation, identified investor identity as a key barrier to the participation of women and people of color in capital markets. This includes perceiving oneself as the kind of person who can or should invest and the feeling that one belongs in the community of people who invest. Commonwealth’s research found that two-thirds of working women earning LMI want to invest in capital markets, but fewer than 40% are actually doing so. Findings from this research informed our national pilot project and the resulting actionable insights, designs, and innovations to create a more inclusive investing environment.

Investing in capital markets remains one of the most effective ways to build long-term wealth and financial security. Yet, there are still systemic barriers–like investor identity–that are preventing a large subset of the population that has a desire to invest from actually investing. What’s so exciting and compelling about this research is the insight it reveals: investor identity is not fixed, but flexible. It can grow and be built over time with the right support and education. That means there’s a real opportunity here to inspire a new generation of investors who will help shape the future of the financial markets.“

Jailan Griffiths, President of the Nasdaq Foundation and Global Head of Purpose at Nasdaq

Key research insights

Among the key takeaways:

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.

Even incremental increases in investor identity are associated with positive action on investing behaviors. In addition, half of participants said they were more comfortable with risk after investing for a year, and the amount of money they thought was needed to invest declined significantly, as did the perceived difficulty of investing. Most of the increase in average investor identity scores happened during the second six months of participation when early experiences start to “click” and translate into changing perceptions. For many new investors, the biggest hurdle is getting started. During the first year, 71% of participants agreed that investing turned out to be easier than they had initially thought.

Platforms can promote the development of investor identity by focusing on its underlying elements, including comfort with uncertainty, active learning, and connecting with others.

Participants who became more comfortable with risk were nearly two times more likely than those who did not become more comfortable with risk to agree that investing gave them greater control over their financial future (79% vs. 44%) and were two times more likely to report feeling a sense of belonging in the investing community.

Active learning was the most cited reason participants gave for feeling like they belong in the investing community. Conversely, a lack of understanding led to not feeling a sense of belonging. 60% of participants who used educational tools felt a sense of belonging in the investing community by the end of the program.

Connecting with others also improves investing experience and made half of all participants feel more confident. 67% of participants who talked to others about investing monthly or more frequently felt a sense of belonging, compared with just 32% of participants who did not. However, not all forms of connection have the same impact. Offline interactions with a social circle that is not interested in investing can be discouraging, while online engagement through large forums and social media can feel overwhelming.

Savings and representation are also key influences in retaining new investors and creating a sense of belonging.

In fact, emergency savings matters more than income for retaining new investors. Participants with less than $500 saved at the start were significantly more likely to withdraw their investment before the end of the pilot, while 72% of participants who began the pilot with more than $500 in savings continued to invest.

Participants who did not feel represented in advertising reported a lower sense of belonging in the investing community. Women are about half as likely to feel represented in investing advertising as compared to men. Representation was also perceived along a variety of axes, including race, gender, age, and income. These communications are many investors’ first impression of platforms and can play a large role in the decision to get started.

Investing experience helps women close gender gaps in investing knowledge and comfort, but men remain more likely to develop strong investor identity. Despite starting at a significantly lower baseline, women showed greater gains in self-reported knowledge of and comfort with investing during the first year, closing much of the initial gap with men. Thus, inclusive design can help new investors overcome systemic barriers, including embedded attitudes about their own capabilities, empowering women and other underrepresented groups to take advantage of the wealth-building opportunities afforded by capital markets.

Ellevest exists to solve many of the issues that Commonwealth’s groundbreaking research has freshly uncovered—women are half as likely to feel represented in investing as men, but once they start, their confidence as an investor skyrockets. At Ellevest, we create offerings for women specifically to help them confidently build wealth. We are thrilled to see our mission validated in this new research.”

Dr. Sylvia Kwan, Ellevest Chief Investment Officer 

New Toolkit Features Research-Backed Guidance For Providers

To support providers, Commonwealth has created the “Unlocking Investor Identity Toolkit” with actionable insights for designing a more inclusive investing experience that promotes investor identity development for beginner investors. Designed with the practitioner in mind, the toolkit can be used by marketing, product, customer success, growth, and strategy managers who want to better understand new investors earning LMI and pursue interventions specific to them.

At Public, we focus on taking the emotion out of investing and provide investors with context on the markets. This groundbreaking research from Commonwealth connects two ideas: normalizing the emotional journey of investing is a critical part of increased belonging to the retail investor community. We are thrilled to be part of the research that has created new insights that will move the whole industry forward to becoming more inclusive.

Sruthi Lanka, CFO, Public

The toolkit, alongside the insights and guidance featured in the Transforming Investor Identity report, provides the information and tools that platforms need to start transforming the investing system and making it a more inclusive opportunity for those who have been traditionally excluded from this space. Even an incremental increase in investor identity is associated with a host of positive outcomes such as investing more funds and recommending investing to friends and family. This inclusivity can also provide access to new markets and to tools to improve customer retention and loyalty among new investors.

The content corresponds to each stage of the consumer journey (attract, activate, and retain) and includes ideas, tactical tips, and a downloadable checklist for reference.

Stash was built nine years ago to help hard-working Americans invest and achieve their goals. Commonwealth’s research validates the importance of guidance and advice, and that people learn by doing. We have always known that the act of investing and saving needs to be easy, accessible, and welcoming to all. We hope others follow suit.”

Liza Landsman, Stash CEO

About the New Investor Initiative

The Transforming Investor Identity research project is part of the Nasdaq Foundation’s New Investor Initiative, which is aimed at addressing critical barriers often overlooked in the capital markets, specifically focusing on empowering underrepresented communities. Thus far, the Nasdaq Foundation has collaborated with three organizations—Commonwealth, digitalundivided, and Black & Brown Founders (in partnership with My Money, My Future). These partnerships encompass a spectrum of strategies, from cultivating new role models to driving educational engagements and conducting community-centered research. This initiative is pivotal in shaping a more robust investor identity within underrepresented communities, fostering inclusivity and empowerment in the financial landscape.

About Nasdaq Foundation

Driven by Nasdaq’s Purpose to advance economic progress for all, the Nasdaq Foundation works with organizations that promote and support under-resourced communities by reimagining investor engagement and equipping communities with the financial knowledge needed to share in the wealth that markets create. To learn more, please visit www.nasdaq.com/nasdaq-foundation. 

About Commonwealth

Commonwealth is a national nonprofit building financial security and opportunity for financially vulnerable people through innovation and partnerships. Black, Latinx, and women-led households disproportionately experience financial insecurity due in large part to longstanding, systemic racism and gender discrimination. Addressing these issues is critical to Commonwealth’s work of making wealth possible for all. For nearly two decades, Commonwealth has designed effective innovations, products, and policies enabling over 2 million people to save nearly $8 billion. Commonwealth understands that broad changes require market players to act. That’s why we collaborate with consumers, the financial services industry, employers, policymakers, and mission-driven organizations. The solutions we build are grounded in real life, based on our deep understanding of people who are financially vulnerable and how businesses can best serve them. To learn more, visit us at www.buildcommonwealth.org.

About Ellevest

Ellevest was founded by CEO Sallie Krawcheck and CIO Sylvia Kwan with a mission to get more money in the hands of women by closing the gender investing gap. Today, with $2 billion in assets under management (and counting), Ellevest helps clients build and manage their wealth through investing, financial planning, and wealth management. Since its founding in 2014, Ellevest has built a community of more than 3 million and been named the 8th fastest-growing fee-only RIA in the US with assets of $1 billion+. See ellevest.com for more information.

About Public

Public is an investing platform that makes building a multi-asset portfolio fast, secure, and frictionless. Members can invest in stocks, options, bonds, crypto, and alternative assets—all in one place. Members can also access real-time and historical fundamental data and custom analysis with Alpha, the AI for investors. At Public, we’re committed to creating a more transparent investing experience that is consistently aligned with our members’ best interests.

About Stash

Stash is an investing app dedicated to empowering people to invest and build better lives. Stash’s plans—starting at just $3 a month—unlock access to a suite of simple, automated solutions designed to help people find security and peace of mind through investing. Stash counts 1.5M active subscribers who have set aside nearly $3B thanks to regular, automatic deposits of $30 on average. In 2023, Stash was noted as “Best Personal Finance App” in the FinTech Breakthrough Awards and Stash’s Smart Portfolio was ranked as the top-performing overall robo advisor in the past year by Condor Capital.