Red Oak's Podcast
Red Oak's Podcast
Navigating a New Era of Investor Behavior: What FINRA’s Latest Study Reveals
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This episode unpacks FINRA’s latest National Financial Capability Study, revealing major shifts in investor risk appetite, information sources, and expectations. It highlights how these trends are playing out across Red Oak’s platform and what financial firms must do to support advisors and investors in a fast-changing landscape.
Welcome to the deep dive. Today we're sifting through a really compelling stack of sources, uh basically designed to give you a clear view of the modern investor.
Speaker 2Yes, specifically how behavior is changing.
Speaker 1Exactly. We've merged some high-level data from the FINRA Foundation's new national financial capability study with uh real-time observations from the front lines.
Speaker 2Right, from the financial industry's own content platforms. It's an ideal pairing, really.
Speaker 1Why is that?
Speaker 2Well, we're moving beyond just serving what people say they feel. We're combining that with what investors and you know their advisors are actually searching for online.
Speaker 1Okay. So it gives us a clearer picture of the gap between intent and action.
Speaker 2Precisely.
Speaker 1And that's the mission today to understand how US investors, you are quickly recalibrating not just your risk tolerance, but also where you go for info and what kind of advice you trust in what FINRA calls a new era.
Speaker 2In this deep dive, it reveals three, I'd say, powerful and sometimes conflicting dynamics. First, there's a broad, um, accelerating pullback in investor risk tolerance, just a general sense of caution. Okay. Second, we see this fascinating divergence in behavior around complex assets, particularly crypto. Retail interest is cooling, but advisor education demand is just spiking.
Speaker 1And advisor investor disconnect.
Speaker 2A big one. And third, the shift towards social media and finfluencers as a primary source of information is well, it's undeniable now, and deeply consequential.
Speaker 1That sets the stage perfectly. Let's start with that first one: the contracting risk appetite. The data shows investor willingness to take big risks for higher returns is pulling back a lot.
Speaker 2It truly is. When a FINRA asked investors if they were willing to take substantial risks in 2024, only 8% said yes.
Speaker 1Only 8%. And just for context, what was that number before?
Speaker 2Well, you compare that to the figure from just three years prior, which was 12 percent.
Speaker 1So it's a one-third drop.
Speaker 2It is. You're seeing a significant loss of confidence or you know, maybe a return to prudence. Depends on how you look at it.
Speaker 1And if you drill down into the demographics, the picture gets even starker.
Speaker 2Right.
Speaker 1We're talking about younger investors.
Speaker 2Exactly. Those under 35, historically, that's the most aggressive group. That demographic saw their willingness to take substantial risk plummet from 24% down to just 15% in that same period.
Speaker 124 down to 15? That's a nearly 10-point drop.
Speaker 2Yeah. Among the very group who theoretically has the longest time horizon to recover from any losses, it suggests the last few years have been deeply formative, maybe even scarring.
Speaker 1So why this sudden contraction? What are the sources pointing to?
Speaker 2It's attributed directly to the economic uncertainty and uh the persistent volatility we felt all through 2025. This wasn't just a vague feeling of unease.
Speaker 1No, it was specific events.
Speaker 2Very specific. We saw high market volatility fueled by recurring tariff debates, geopolitical stuff, and then domestic political gridlock.
Speaker 1The government shutdown.
Speaker 2Yeah, and all the legislative uncertainty around that massive, contentious fiscal legislation. The sources called it the Big Beautiful Bill.
Speaker 1And all that uncertainty, it just created genuine investor anxiety.
Speaker 2It absolutely did. And we can prove that behavioral response with real-time data.
Speaker 1How so?
Speaker 2We looked at search analytics across compliant content platforms, you know, the vetted educational sites from financial institutions. Right. And the data showed that searches related to bear markets, volatility, and just general risk management more than doubled year over year.
Speaker 1Doubled. So investors weren't just waiting for a call from their advisor.
Speaker 2No, they were actively trying to understand and uh mitigate potential downside on their own.
Speaker 1And here's the data point that really surprised me. The one that tells you exactly where that anxiety was focused.
Speaker 2Let me guess.
Speaker 1The single most searched term on one of these platforms. It wasn't recession, it wasn't interest rates, it was tariffs.
Speaker 2Tariffs. That's highly specific anxiety, isn't it?
Speaker 1It is. It signals that investors were really concerned about the microeconomic implications of trade policy, a factor they just can't control.
Speaker 2And when investors are searching for something as specific as that, they aren't necessarily panic selling, but they are clearly deeply uneasy. They're looking for a rational explanation for what's happening.
Speaker 1So this whole recalibration, it really underscores a critical need for financial organizations, doesn't it?
Speaker 2It does. They have to acknowledge those very real concerns, the tariff anxiety, the political risk, and then translate that into timely, compliant educational materials.
Speaker 1The challenge is helping people distinguish between appropriate long-term risk and just letting market fear drive all their decisions.
Speaker 2Right. It's about meeting them where their anxiety is. When the environment feels unpredictable, the message has to pivot away from aggressive returns and toward resilience and stability.
Speaker 1Okay. So we had this general market mindset of increasing caution, but let's shift gears now to segment two. Because that caution doesn't seem to apply evenly everywhere. This is where that investor advisor dynamic starts to decouple, especially around crypto.
Speaker 2Yeah, the divergence is fascinating. It really points to the maturing of this asset class. Fine arrow's research shows a cooling trend among retail investors for these speculative assets.
Speaker 1Aaron Powell Okay, so what are the numbers?
Speaker 2The number of retail investors who said they were even considering crypto dropped from 33% in 2021.
Speaker 1Which is basically the peak.
Speaker 2Right, the peak. It dropped from 33% down to 26% in 2024.
Speaker 1And that reduction aligns perfectly with the broader risk aversion we were just talking about. It just makes sense that the average investor would step back and say, you know what? Maybe I'll wait this one out.
Speaker 2That's one side of the coin. But then you see the other side. Which is while that retail interest in buying crypto is cooling, advisor demand for compliant education about crypto is rising dramatically.
Speaker 1How dramatic are we talking about?
Speaker 2Advisor searches for crypto-related content increased more than 200% year over year. 200% on their internal industry platforms. That's triple the search rate from the previous period.
Speaker 1That is a huge disconnect. So if the retail investor is backing away, why are financial advisors suddenly searching for crypto knowledge at this accelerated pace?
Speaker 2Well, it's more strategic than just catching up. They need to understand the asset class for I think two main reasons. Okay. First, they're dealing with clients who might still hold significant dormant assets. Stuff they bought during the peak that's now just sitting in a wallet.
Speaker 1Ah, so they need to address tax questions, estate planning.
Speaker 2Exactly. All those implications. Yeah. They need to provide context without necessarily endorsing future investments. It's a fiduciary duty issue.
Speaker 1That makes perfect sense. And the second reason preparation.
Speaker 2Preparation for regulated products like ETFs and other instruments that allow for compliant, cautious exposure within a traditional portfolio. Right. The topic isn't going away. So the advisor's job is to be the rational filter for their client. They're getting ready to navigate a product that's shifting from this speculative internet thing into a regulated, though still volatile, part of the ecosystem.
Speaker 1So the implication for asset managers is clear. They need to pivot from marketing these aggressive growth stories to providing grounded risk-aware guidance that actually supports the advisor.
Speaker 2That's it. It's about arming advisors with facts and compliant talking points. The goal isn't necessarily to drive more crypto adoption, it's to ensure the client gets professional advice on a topic that's still a huge part of the conversation.
Speaker 1Let's pivot now to what might be the biggest behavioral shift we've seen in years. Farnera's research calls it its most consequential finding.
Speaker 2Yeah, the growing systemic reliance on social media and influencers.
Speaker 1As the core source for investment information.
Speaker 2This trend is fundamentally reshaping how market knowledge gets transmitted. And the numbers, they're truly eye-opening. We are not just talking about bored teens on TikTok.
Speaker 1Not at all.
Speaker 229% of all investors now rely on social media for investment insights.
Speaker 1That's nearly one in three adults with money in the market.
Speaker 2It is. And when you look at the younger demographic, the habit is even more entrenched.
Speaker 1How much more?
Speaker 2The data shows that 61% of investors under 35, so the majority use YouTube as a primary channel for financial education.
Speaker 1YouTube is now the default financial literacy platform for the next generation.
Speaker 2It is. And that search for knowledge, it translates directly into action. Twenty-six percent of all investors use recommendations they get from influencers.
Speaker 1Among younger investors, that number, predictably, it just explodes.
Speaker 2Jumps right to 61%. So they're not just passively watching this content, they're acting on this personality-driven advice.
Speaker 1And this is where the content itself is shifted, right? The data points to a rise in what's being called personality-driven, trust-based investing content.
Speaker 2Yeah, creators are realizing that just churning out high-frequency, low-quality posts for visibility is less effective now.
Speaker 1Instead, they're investing heavily in narrative.
Speaker 2Exactly. They're producing more polished, cinematic, story-driven content. It's designed to communicate who they are, their struggles, their successes, their authenticity.
Speaker 1The idea being to build a personal connection, that relatability factor.
Speaker 2And that becomes the conduit for the financial advice. Which brings us to the core conflict the study highlights the relatability risk paradox.
Speaker 1Explain that.
Speaker 2Well, many finfluencers succeed because they feel so relatable. They speak the language of a younger, maybe less experienced investor.
Speaker 1But that relatability, it often drastically outpaces their actual expertise.
Speaker 2That's the paradox. Some of these creators, they're new to investing themselves. Their commentary might be delivered with great enthusiasm, but it's unvetted. It blurs critical lines for first-time investors who don't have a solid foundation to filter the advice.
Speaker 1And that's where the risk lies. The viewer sees this highly professional video.
Speaker 2But the underlying content might be encouraging them to chase a volatile meme stock or a highly leveraged trend just because everyone is talking about it.
Speaker 1The production quality is top tier, but the quality of the actual strategy often lags way behind traditional financial education.
Speaker 2Right. It's the difference between entertainment and durable knowledge. There is a notable exception the source has pointed to, though.
Speaker 1Sponsored creator.
Speaker 2Exactly. When influencers are sponsored and follow firm-provided scripts, their advice tends to stay safely within compliance guardrails.
Speaker 1Because the quality control is baked into the sponsorship.
Speaker 2Right. But that is the exception, not the rule, across the broader FinFluencer ecosystem.
Speaker 1And for the vast majority of that young audience, the motivator remains FOMO. The fear of missing out.
Speaker 2That pressure is still a powerful motivator, encouraging younger investors to act quickly, chase trends, often to their own detriment.
Speaker 1It creates unnecessary urgency.
Speaker 2Exactly. It's the direct counterpoint to the timeless advice that should guide every new investor. And the sources offer a necessary reality check to all this social media urgency.
Speaker 1And what's that reality check?
Speaker 2That in reality, the only message that deserves genuine urgency is the foundational principle that's guided generations. Start early, invest regularly, and let time in the market do the heavy lifting for you.
Speaker 1That remains the single most reliable path to long-term success.
Speaker 2Regardless of what rapid-fire scheme you see on your feed this afternoon.
Speaker 1That brings us back to the core challenge here. All these findings reinforce that investor behavior is changing and it's evolving faster than established financial firms can adapt.
Speaker 2The path forward, the study suggests, requires operational agility. It's not about producing more content to compete with influencers.
Speaker 1It's about producing the right content with speed and precision.
Speaker 2And that speed is critical. As the need for timely, compliant information for advisors grows, we saw that with the 200% surge in crypto searches, firms need intelligent systems that can accelerate the content review process. Because if the industry can't bridge that speed gap, the void will continue to be filled by personality-driven advice, which, you know, while it's highly relatable, may lack the vetting and expertise needed for sound long-term decisions.
Speaker 1This has been a deep dive into investor behavior and this massive generational shift. It's clear the financial landscape is being redefined not just by economics, but by relatability.
Speaker 2The data presents a fascinating paradox, doesn't it? Investors are becoming more cautious about risk while simultaneously relying on the riskiest, least vetted source of information for guidance, social media.
Speaker 1And that leads us to our final provocative thought for you to explore on your own. Considering the sheer scale of this shift, where 61% of young investors are relying on FinFluencers, how will the traditional financial industry successfully bridge the fundamental gap between offering vetted, compliant expertise and meeting the modern investors' powerful and deeply personal desire for trustworthy relatability?
Speaker 2A critical question for the future of finance, indeed.
Speaker 1Something to mull over until next time. That's all for this deep dive. We'll see you soon.