A wave of brokerage firms and fintechs have started allowing customers to trade small slices of individual stocks. Many are marketing the offering as a way to democratize investing and allow average customers to own popular but highly priced stocks.
It’s all part of a fierce competition for young investors, especially high earners who could one day turn into lucrative wealth management clients.
We’ve been tracking the rollout of fractional share trading at startups and incumbents alike.
Firms invoke “democratization,” the industry buzzword du jour, to describe the fractional trading feature. Startups and legacy players talk of leveling the playing field for all users regardless of whether they can afford a share of highly-priced stocks.
But companies have good reason to attract investors while they’re still building wealth. For instance, they can lock in young customers with the hopes of cross-selling products to them down the line. And depending on how brokers clear the shares, fractional trading could offer another revenue stream after axing commissions to zero.
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