Charles Schwab study reveals engagement preferences for new investors

Neesha Hathi, Charles Schwab Chief Digital Officer, joins Yahoo Finance to discuss how investor habits have changed amid the pandemic, trends among new investors, and trust in financial institutions.

Video transcript

- But I want to get to a new Charles Schwab survey, they're out with their investing in technology study. And here to help us break it down is Neesha Hathi, Charles Schwab's Chief digital officer.

So Neesha, I was looking through your findings and more than half of those you surveyed think it is possible to have a personal relationship with a financial company, like a Charles Schwab, through only technology. Talk to us about that, meaning no in-person interaction.

NEESHA HATHI: That's right. I mean, I think traditionally we always think of a personal relationship as human, face to face or maybe on the phone. And what we found in this study is that we have a lot of investors these days who believe that you can have a personal relationship without ever actually communicating via phone or in person with somebody.

And actually, if you look at the youngest group of investors, or excuse me, the newest group of investors, which we call generation I, it's even higher. 74% of those investors say that they can have a personal relationship with the brand, with a financial services institution, without actually meeting with an individual from that institution.

- So, what are some of the trends that you're seeing among retail investors? But especially among the younger, what you're calling the generation I, I've got to get used to that, generation I investors. What are they doing right now? Especially when we're seeing volatility return to the market, when we're seeing so many more asset choices than ever before with the emergence of cryptocurrencies.

NEESHA HATHI: Well, I think one of the things that's so interesting about this generation I, and by the way, we define this is our new investors who came into the markets either in 2020 or 2021. And when you look at those investors, what you see is that they're very inclined to engage digitally, which is not unexpected.

But when the market turns, when there's a downturn, when they're wanting more advice, when they want to kind of validate, they actually want to talk to people. And I think that's so not what people expect.

I think we think of this population often as these are the folks that are trading actively, that they're into meme stocks and actually what you see is many of them are looking for education and they're actually looking for that human connection when things aren't feeling as stable in the markets. And times of volatility, of course, that's one of those times.

- I want to talk to you for a minute about trust, trust in financial institutions. When retail investors are out there looking for some support, what matters most to them? We know they like to communicate mostly through technology but what's making them gain trust in one particular firm over another?

NEESHA HATHI: Well, this was one of, I think, the most interesting findings. So, when we think about, again, these younger investors, newer investors, they're inclined to want a digital relationships.

So actually more than half will say their preferences to engage with their financial institution digitally first. But then when you ask them about, well, what are the key drivers of trust? Well, 95%, 96% of them will say the key drivers of trust are actually being able to talk to somebody.

So whether that is calling in and talking to someone in a contact center, meeting face to face in a branch, 96% said that's actually a driver of trust. And so when we think of these digitally inclined investors, it's really important to not lose the nuance of what actually drives trust with them is often the human connection and that ability to get to the expertise when they need it.

- Does that put platforms like Robinhood at a disadvantage? I mean, Robinhood doesn't exactly have physical locations that an investor can go into and speak with an advisor.

NEESHA HATHI: Well, I think for many investors that's a really important driver, as we said. And so I think for us we've always believed at Schwab that the combination of human and technology and integrating those really well, is really where the secret sauce is.

And I think what we continue to see is when things are good, we've had this amazing bull market for quite some time, when things are good, maybe people don't realize as much that they want to talk to somebody, they don't need to pick up the phone or go into a branch to meet somebody. But when things get volatile or the market starts to correct, that's when people start to get worried.

And sometimes they just want validation. One of the things we see is that when during times of volatility, we get more calls into our certified financial planners, our contact centers. And often clients don't actually even change their portfolios, they just want someone to kind of engage with and say, hey, should I change something? Am I doing OK?

So it's a really fabulous way to kind of bring the human connection but still you need those digital capabilities to be robust. So we truly believe that the combination is the most powerful.

- Yeah, sometimes they just want to talk it out with somebody. But what about how the pandemic has really made that push even greater into technology? Because a lot of people who never would have thought to do some the bulk of their trading online were really forced to because so many places were shut down during the pandemic. How much of that do you think is behind this push to technology and to trusting technology now more than ever?

NEESHA HATHI: Yeah, that was actually the Genesis of this study because as a chief digital officer, we were looking at all the engagement last year. So we saw over a billion and a half log ins across our web and mobile properties last year. And the question was, well, was that going to last? And we continue to see a lot of engagement and there is a preference for many investors, whether they're seasoned investors or newer investors, to engage digitally.

But what we do see also is that this desire to talk with somebody during those times of volatility is really important even if they believe that they're going to continue to adopt technology at a faster pace. So all these populations will tell you that, yes, they tried these new technologies and they're going to adopt those technologies at a faster pace post-pandemic.

And maybe it's just once you try it, you kind of feel comfortable and now you're like, oh, OK, I know how to do that, I'm only going to need to call when I have something new or I need that validation.