Both discount brokers and personal finance startups are steadily eating into the customer base of traditional, full-service brokers. According to Corporate Insight and Cerulli Associates, nearly twice as many U.S. retail investors are using online brokers since the 2008 financial crisis. In addition, a wave of new personal finance startups have also increased in popularity, especially amongst the younger demographic. The traditional investment management business has really taken a hit in the eyes of the public following the financial crisis, as many people lost trust in big banks. While discount brokers have typically appealed to do-it-yourself investors, companies like Fidelity and E*Trade are adding advisory products and financial planning services that have gained traction with mass-affluent investors.
Personal finance startups such as Jemstep, Personal Capital, LearnVest, and others are offering new, low-cost solutions in attempts to democratize financial management. Many startups are bringing high-quality, personalized investment advice that in the past was only available to wealthy investors. These companies have reduced the complexity and intimidation factor that is often associated with traditional financial advisors, and are providing these services at a lower price point. The proliferation of these startups highlight the longer-term trend of baby boomers being replaced by millennial investors.
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