© Copyright Acquisition International 2024 - All Rights Reserved.

Article Image - Forget GameStop, gamification is the real investing revolution
Posted 5th March 2021

Forget GameStop, gamification is the real investing revolution

The impact on the financial world was sensationally underlined in the US, when a swathe of retail investors sought to bring down eminent hedge funds by bidding up the beleaguered GameStop stock. Behind the David and Goliath headlines, are some trends that the wealth industry must acknowledge, and consider deeply, the potential consequences.

Mouse Scroll AnimationScroll to keep reading

Let us help promote your business to a wider following.

Forget GameStop, gamification is the real investing revolution
gme

Thomas Lowe, Head of Product at Winterflood Business Services

No industry has been shielded from the disruptive legacy of the coronavirus pandemic.  The impact on the financial world was sensationally underlined in the US, when a swathe of retail investors sought to bring down eminent hedge funds by bidding up the beleaguered GameStop stock. 

As rumours continue to swirl around which stock will be targeted next by so-called investment vigilantes, the incident has broad implications for financial services. For the UK’s wealth industry and its guardians, the key question is whether this trend will blow across the Atlantic – and how could this impact the next generation of investors seeking to ensure a healthy and robust financial future.  

Behind the David and Goliath headlines, are some trends that the wealth industry must acknowledge, and consider deeply, the potential consequences. 

 

Betting for brokerages 

As Tesla visionary Elon Musk appeared to suggest in a recent Tweet, this situation was inevitable. Ultra-low rates, asset prices removed from fundamental reality, a technology enabled hyper-acceleration in the democratisation of investor platforms and the growth of chatrooms created the backdrop for a group of amateur day traders to take on investment titans. 

The pandemic has seen retail investing surge. A key underlying driver of this trend is that millennials have had more time and have begun to take ownership of their financial future. The other phenomenon is that due to a dearth of live fixtures, sports-betters have been switching to day trading.  

Alarmingly, we have seen a correlation in the decline of sport betting versus a rise in new retail share accounts. This has injected an elevated level of animal spirit to US markets. During the pandemic apps like Robinhood, Webill and Sofi have taken on millions of new accounts in the US. To illustrate the investing frenzy, as the GameStop story unfolded, Robinhood had more than 600,000 people download its app on Friday, according to JMP Securities.  

The other complicating factor is the business model operated by Robinhood and others. Payment for order flow is a system where a brokerage firm receives money for directing orders to specific parties for trade execution. This is banned in the UK due to the conflicts of interest that it can create but it is still allowed in the US.  Payment for order flow creates a potential lack of transparency, but also, as options/derivatives can be far more lucrative for trading firms, there is the potential for retail investors to be pushed in the direction of sophisticated products where they aren’t aligned to the investment goals.

This is best highlighted by the increasing interest in risky products like CFDs or “contract for differences” amongst retail investors, which has been likened to gambling rather than investing. A review of some platforms that offer CFDs to investors show them disclosing statutory warnings that 67-78% per cent of retail investors lose money when trading CFDs.

 

Education and access  

These complicated trades give clients the option to buy or sell securities at predetermined prices. By nature, this is more speculative — and gives retail investors the ability to use leverage, which can deliver more upside, but also potentially big losses. 

This brings us to a crucial point. Should the democratisation of investing just be about access? At WBS, we are supporting platforms to expand their investment universes, but we believe without education, access is not itself enough to ensure financial well-being. True investor democratisation is about leveraging financial instruments such as ETFs and fractional shares to invest early and often, time in the market is almost always more profitable than timing the market – but alongside this new architecture, the industry and the regulatory bodies also have a moral responsibility to ensure that investors are adequately safeguarded.  

While GameStop appeared to pit the person on the street versus hedge funds, the reality is that behind any chatroom or blog could be a scheme to manipulate the market. The most important thing is that the retail investor population is protected, and that the industry continues to use newer and smarter tools to support that goal.

 

Gamification over Gaming 

Over in the UK, we should welcome platforms that encourage long-term saving such as Hargreaves Lansdown. The firm has reported a surge in new accounts during the pandemic. The rise of younger investors pushed the average age of its platform users down from 54 in 2012, to 47.  

This is the beginning of a seismic generational shift and wealth transfer. But alongside the established platforms, there is a wave of digital investment platforms, such as Digital Money Box and Wealthify who are encouraging investors to invest early and often through low-cost liquid instruments that are easy to understand and are diversified.  

However, we need to draw a clear line between gamification and gaming or gamifying. Some platforms have been accused of “gaming” investing and not putting in place proper controls to safeguard inexperienced investors. But there are plenty of platforms trying to support long-term investing through gamification and nudges – powerful tools which we believe will be the real investing revolution for millennials. 

Gamification is when investors interact with their personal financial objectives with an investment firm’s game-based applications. This method can use incentives to reward engagement and harness techniques in the form of interactive games to encourage clients to work toward their respective investment goals. In this scenario, behaviour might be mapped via a virtual reality simulation to illustrate benefits for saver. This type of aid enables savers and investors to visualise the rewards of the investing both time and money in their financial goals – and creates a wired emotional response to flex their saving muscles. 

In improving the world’s financial literacy, the industry should not push for risky investment strategies like day trading – in the new frontier for retail investing the only game in town should be gamification for long term success.

Categories: Strategy


You Might Also Like
Read Full PostRead - Eye Icon
Out There: Reasons To Use Promotional Products In Your Marketing Strategy
News
03/01/2023Out There: Reasons To Use Promotional Products In Your Marketing Strategy

Promotional products are a great way for businesses to get their message out to potential customers. They are an important tool in any marketing strategy, as they can be used to build brand awareness, increase visibility and engage customers. From pens and mug

Read Full PostRead - Eye Icon
Anne Boden is Ready to Shake Up Retail Banking in the UK
Finance
14/04/2015Anne Boden is Ready to Shake Up Retail Banking in the UK

Having worked in the banking world since the 1980s, Anne Boden has seen a lot of changes - but also a lot that has stayed the same.

Read Full PostRead - Eye Icon
How to Prepare Your Business for Expansion: A Quick Guide
News
03/02/2023How to Prepare Your Business for Expansion: A Quick Guide

There’s no doubt that starting a new business can be very rewarding, but there are also challenges that come with it. Making sure that your business is thriving and taking the next steps will be vital to your success.

Read Full PostRead - Eye Icon
Can Toshiba Survive Yet Another Blow? Maybe PwC Holds the Key
Finance
09/05/2017Can Toshiba Survive Yet Another Blow? Maybe PwC Holds the Key

Just as industry giant Toshiba battles to overcome one financial woe, another strikes them where it hurts, and that would be their bottom line.

Read Full PostRead - Eye Icon
The USA’s Most Innovative Business Leaders 2015
Finance
10/12/2015The USA’s Most Innovative Business Leaders 2015

Senior Star Management Company are a family-owned sheltered community management firm specialising in providing professional, tailored care for their residents. Chief Operations Officer and Senior Vice President Anja Rogers talks us through the firm’s high q

Read Full PostRead - Eye Icon
July Winners’ Directory
Innovation
31/07/2016July Winners’ Directory

July Winners' Directory.

Read Full PostRead - Eye Icon
Analyzing Multi-Vehicle Accidents: Challenges And Strategies For Fair Settlements
Legal
28/07/2023Analyzing Multi-Vehicle Accidents: Challenges And Strategies For Fair Settlements

As roads become busier, the incidence of multi-vehicle accidents, or 'pile-ups,' has increased. These accidents, involving three or more vehicles, create unique complexities in the arenas of law and insurance.

Read Full PostRead - Eye Icon
Western Digital Committed to Creating Significant Value Through SanDisk Acquisition
Finance
23/02/2016Western Digital Committed to Creating Significant Value Through SanDisk Acquisition

Western Digital® Corporation today announced its agreement with Unisplendour Corporation Limited (Unis), and Unis Union Information System Ltd. (Unis Union), a subsidiary of Unis, agreed to make a $3.775 billion equity investment in Western Digital, has been

Read Full PostRead - Eye Icon
4 Tools to Help Your Brokerage Stay Successful
Legal
12/01/20224 Tools to Help Your Brokerage Stay Successful

Brokers' responsibilities involve cross-selling with other financial products and services their brokerage firm offers. The vast majority of new brokers initially keep a daily schedule built heavily around marketing themselves. They have to get needed leads an



Our Trusted Brands

Acquisition International is a flagship brand of AI Global Media. AI Global Media is a B2B enterprise and are committed to creating engaging content allowing businesses to market their services to a larger global audience. We have 14 unique brands, each of which serves a specific industry or region. Each brand covers the latest news in its sector and publishes a digital magazine and newsletter which is read by a global audience.

Arrow