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This article appears in the June 2021 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.

Retail trading is having a moment. Rising discretionary income and time spent online have created the conditions for an online trading boom. Throw in tales of astonishing fortunes won and lost — both in traditional stocks and virtual assets, such as cryptocurrencies and non-fungible tokens — and the allure is easy to understand.

But when the “diamond hands” shatter and the “lulz” subside, can the investment industry convert fun-loving Redditors into long-term investors?

While the industry enjoys the recent run-up in retail commission revenue, it should also be thinking about the long term. Ideally, many people who began trading for entertainment would mature into advisory clients with boringly sound financial plans and dutifully diversified portfolios.

Yet as the pandemic recedes and many of the conditions that drove the trading boom begin to abate, the industry could lose a large crop of potential long-term clients.

The challenge is converting these young prospects — many of whom distrust the Bay Street establishment — into viable, long-term clients. Clearing that considerable hurdle will require industry and regulatory innovation. The pandemic has forced both firms and regulators to swiftly adapt to unprecedented conditions. That same ingenuity needs to be deployed to enhance service to clients.

On the regulatory front, there’s historically been a bright line between advice providers and order-takers. While there has been some blurring of that line in recent years, regulators must ensure a path to serving inves­tors with new forms of advice that can be delivered via the existing — and yet to be invented — digital channels where these investors reside.

Building trust among a skeptical population may prove to be the biggest obstacle, and there are no shortcuts to solve that. Combining aligned incentives and putting clients first is the only sure route to success.