Online Brokers Are Pivoting To Video To Attract Younger Investors

Video content is picking up steam across the financial industry as online brokerages seek to move away from dreary PDF statements as the medium of choice for reporting results.

The reason for the move to video can be captured in a single number: $30 trillion. That's the amount of money set to transfer in coming years from the Baby Boomer generation, the wealthiest in American history, to their Gen X and Millennial heirs.

With this inheritance also comes the high probability that funds will move from one financial institution to another. The thirty-something with a young family, who has just finished paying off their student debt and has a few thousand dollars in the bank could have a very different financial profile in just few more years.

Looking across the financial industry, especially the large brokers, there's not a whole lot to attract them. The truth is, many financial institutions seem eerily similar: there is not much difference in trading fees, all offer low-cost ETF alternatives to mutual funds, and generally, they have roughly the same suite of research tools. Many have already integrated the capabilities of robo advisers, trading apps, and even crypto-currency exchanges.

So how exactly do financial institutions differentiate themselves to attract and retain the next generation of investors?

Some of finance's largest incumbents accelerating their digital endeavors, including more video and virtual reality, realizing the need to act more like the digitally native and social media companies consumers are choosing in other areas of their lives.

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Fidelity's recent experimentation with Amazon's new VR platform, Sumerian, highlights some investment in risk-taking, although that technology will take time to become mainstream. In the Fidelity demo, the Sumerian tool is used to create a virtual assistant named Cora who can answer questions about a particular stock and display information — all viewed through a virtual reality headset. If VR catches on, this kind of dynamic video could transform customer interactions. 

More imminently, many of the big brokerages are specifically trying dynamic, data-driven video to connect with this new generation of customers.

New video content types gaining steam  

While online brokerages have long used video for talking head interviews or education, the latest wave is to tailor video with content for a specific individual. You know those recap videos that Facebook creates that many people like to share? They are not custom-made for each Facebook user, but they are personalized with all of your photos and numbers of likes. Brokerages imagine cooking up those kinds of videos for your portfolio.

The video fitness app Strava, illustrates the kind of client interaction that dynamically generated, personalized video can deliver. Who knew that watching a video recap of your exercise for the last year could be so informative and entertaining?

Cheap cloud computing resources combined with Artificial Intelligence along with video platforms like Blender and Adobe After Effects are some of the tools of choice used behind the scenes to create these experiences.

Imagine logging into your portfolio and having the option to watch a two-minute automated video with voice and graphics summarizing your financial positions. Or perhaps you could ask a digital assistant for a history of Apple's earnings, and instead of rows of fundamentals and financial statements, you get a machine voiceover with graphics explaining how Apple has done over the past 4 quarters and what to look for in their upcoming earnings event.

With such tools, could enough compelling personalized content be generated to create a video channel for a single user? Online brokerages see the possibilities as endless, and much more cost effective than other video types that is traditionally produced with a cast and crew.

The promise of machine-generated video is that it's data-driven, personalized, scalable, can be used on any channel with any device, and it's also fully automated. The vision is there's no talent to manage, no scripts to write, no $100,000 invoices from a cast and crew for a video you might use one time and then forget ever existed.

Instead, the smartest brokerages will experiment with ways to create an engaging experience. Investing lends itself to gamification, for instance. Why shouldn't investors watch their performance against indexes with as much interest as they would watch their fantasy football league?

They will also try these ideas and then test them. They will have the ability to see what their users' click, watch to completion and what they come back to again and again. This should allow them to get as good as video game companies at creating those hooks that keep investors engaged and coming back for more.

It may sound like a lot of work for something fun and seemingly frivolous, but in fact there is real opportunity for those that get it right. Millennials are projected to make up over 40 percent of the U.S. workforce by 2022, according to a study from the American Bankers Association. Banks and other financial institutions can either build technology and processes that engage the next generation of customers or risk losing them to the institutions that have figured it out.

Financial institutions must accelerate the adaptation of technology if they are to have a future. McKinsey & Company said in one report that the situation was acute and that banks, in particular, have "three to five years at most to become digitally proficient."

That report was issued three years ago, so, to the extent that brokerages believe their consultants, time is running out.

Michael Repsher is a product manager at Markit Digital