June 8, 2023


The Number One Source For Business

Lessons for wealth management in the wake of the GameStop saga

The GameStop saga of earlier this year has one silver lining.

Although the serious concerns about massive instantaneous trading by unsophisticated Robinhood users aren’t going away, neither are the tools and lessons that wealth managers could use to help a new generation of clients invest for the long term.

In a panel at Financial Planning’s INVEST conference moderated by Ezra Group CEO Craig Iskowitz, financial advisors and even competitors to the self-directed investing firm with millions of daily users pointed out the potential lessons from Robinhood’s technology and mission of enabling ordinary people with the same ease as shopping online.

Take Wall Street Bets as an example. Many members of the Reddit forum teamed up in January with Robinhood users in a bid to take down hedge funds that had bet against firms like GameStop and AMC Theatres. A group like this could represent a “spark” encouraging young people to invest or do more 401(k) research, according to Ryan Spradlin, VP of product at automated asset management firm M1 Finance.

“There’s an opportunity there for everyone in our industry to leverage that and try to use that to help guide users, customers into the sort of financial tools and sort of financial programs that are going to benefit them the most,” Spradlin says. “Trying to take the positive light on this, I think that there’s a real opportunity to leverage that halo effect.”

In addition, although the infamous confetti that used to show up on users’ screens when they made trades is gone from Robinhood, certain forms of “gamification can be very powerful,” says financial advisor Marguerita Cheng of Blue Ocean Global Wealth.

“The first thing it can do is it can engage people, it can provide education and pound these nudges along the way,” says Cheng. She described how her Apple Watch promotes daily exercise and movements with three rings tracking how many calories she’s burned toward her daily goal. “I find that motivating because it is incentivizing me and encouraging me to engage in positive behaviors,” she added. “So I think wealth management firms can use gamification to improve education outcomes and encourage positive behavior.”

Financial Planning Invest panel on GameStop

From left to right in a panel at Financial Planning’s Invest conference, Ezra Group CEO Craig Iskowitz, Neel Ganu of Finch, Ryan Spradlin of M1 Finance, Marguerita Cheng of Blue Ocean Global Wealth and Douglas Boneparth of Bone Fide Wealth spoke in a panel about the lessons for wealth managers from the GameStop saga earlier this year.

Wealth managers could also take a page from Robinhood’s book by focusing on one particular service and building “amazing” technology around it, according to advisor Douglas Boneparth of Bone Fide Wealth. He predicts that wealth managers are “going to get there” eventually, when it comes to creating a great user experience for comprehensive planning tools the way Robinhood has for self-directed investors looking for commission-free trades.

“The way it’s designed, the user interface, it makes it very powerful and very potent when working in that one area,” Boneparth says. “I wish I had something that sweet, cool-designed, encapsulating of all six areas of personal finance that I could distribute to my clients.”

The “incredible user experience” of firms like Robinhood, Wealthfront and Acorns is driving younger investors to them, agrees Neel Ganu, the founder of checking account and investing service Finch. Ganu describes the stakes as no smaller than “access to a generation” of potential clients for wealth managers.

“There needs to be that evolution,” Ganu says. “Wealth management is no longer a static activity, which happens once a quarter or at certain periods, and that entire experience needs to be built as part of people’s everyday financial lives.”