Affluent Retail Investor to Unleash $100 Trillion by 2020?


The retail investor is entering a golden era. While the advent of the internet ushered in the first wave, unlimited access to data and research in real time are increasing this natural phenomenon. Affluent retail investors are taking responsibility of their investments; by forgoing the high-fees and conventional broker or money-manager relationships, retail investors are setting themselves free. With freedom comes greater risk. But, an avalanche of capital is coming to the market, led by this demographic. Everything from what we eat and buy has a social license attached to it. Investing is no different and retail investors are directing their capital toward products that align with their environmental and social views.

Investors now believe, arguably for the first time, that investing in socially responsible products and instruments will boost returns, not hurt them. The significance of this is wide-reaching as it could give way to trillions in investment. This investment will have a multiplier effect as retail investors dive into ‘impact investment products’ hoping to make a difference and achieve a higher return.

In an FT article on fixed income and green bond investing, Billy Nauman a Financial Post contributor illuminates how the next wave of retail investors will participate. He notes a few different surveys, explaining,

“The second survey, by UBS, which polled 600 institutional investors, found that 78 per cent incorporate environment, social and governance factors into their daily investment decisions.”

We’ve written about this trend before in the The Dawn of The Green Bond Investor. Green bond investing is one of the fastest growing segments in the financial world.

Retail Investors to Change Investing

Saadia Madsbjerg, managing director at The Rockefeller Foundation,

“The next frontier for impact investing lies with mass affluent retail investors, who are projected to have some $100tn in investing power globally by 2020.”

$100 trillion is a staggering figure and it will fuel untold innovation and new products in the years ahead. Self-directed retail investors are the tip of the green bond investing cycle. They want to profit ethically and are willing to put up their hard-earned cash to do so.

Amit Bouri, chief executive of the GIIN summarizes,

“The financial services industry has not caught up with the desire among retail investors to put their investments to work to have a positive impact on the world.”

Retail investors want the satisfaction of knowing their money is being invested for good, not just profit. Also, the loop effect will force more companies to act socially and environmentally responsible. Expect new products, ETFs and other passive investing platforms to emerge to service these demands.

Finally, like so many recent disruptions, such as how people travel, connect and date, millennials are leading the way. With investing next on the list, expect self-directed retail investors to change the investing landscape forever. When one acknowledges this demographic is about to unleash trillions in investment capital the opportunity becomes clear.