The apparent rise of retail investors flexing their financial muscles is an opportunity to promote democratisation, education and trust between individuals, institutional market participants and politicians, says International Securities Lending Association (ISLA) CEO Andrew Dyson.
Despite the thorny due diligence question of where a broker or regulator should draw the line in maintaining market stability and protecting amateur investors from themselves or abuse, Dyson argues against trying to put the genie back in the bottle.
Dyson says suggestions that retail investors should be barred from leveraging more complex products “may appear expedient from a political perspective” but are “fundamentally flawed” and risk creating “further divisions between the traditional financial markets ‘elite’ and their counterparts, and the new populist day traders”.
“Part of opening-up of markets to retail investors must include a commitment from regulators and politicians to empower its citizens through the development of greater financial fluency, in the form of better education that will build the trust that is needed for these markets to reach their full potential,” he states.
Moreover, anecdotal evidence of investors losing their life savings as the share price plunged back to 2020 levels further “highlights the importance of advocating for such broader education”.
Greater and more direct action from retail investors is here to stay, Dyson concludes, advising that it is therefore “crucial that these [market] changes are embraced”.
