Retail investing is booming. Here's what Wall Street is expected to do with 10 million new members

Published Mon, Jan 11 20212:04 PM EST

(This story is for CNBC Pro subscribers only.) 2020 was a red hot time for the retail investing industry, but 2021 could bring another solid year as traders stick around after the pandemic. Retail trading just wrapped up a record year in 2020, as unprecedented market volatility and Covid-19 lockdowns created a unique opportunity for regular investors to play stocks' unlikely but epic comeback. Public e-brokers Charles Schwab , Interactive Brokers , now-acquired E-Trade and TD Ameritrade and private stock investing firms Robinhood and Fidelity experienced explosive account and trading volume growth last year even with low barriers to entry into the retail investing space. "2020 ended up being the perfect storm for retail trading," said JMP Securities analyst Devin Ryan. "It started with the extreme volatility which typically is a strong corollary with trading volume. The pandemic added an additional thread where the mass wave of individuals were working from home, paired with the convenience of being able to trade online." JMP Securities estimates the brokerage industry added roughly 10 million new clients in 2020, according to app download data from SimilarWeb. About 6 million of those new investors are operating on millennial-favored stock trading app Robinhood, which pioneered "free commission trading" back in 2013. "I think people underestimate just how much of a catalyst having a free offering out there is, so that you can buy and sell stocks for basically 'free,'" said Tim Welsh, founder and CEO of wealth management consulting firm Nexus Strategy. "If you look back to 1999 and 2000, the dot-com era, that's when this stuff first existed. We saw the same sort of exuberance. Now its all free." Record accounts and trading The major online brokers — Charles Schwab, TD Ameritrade, Etrade, Fidelity and Robinhood — saw new accounts spike in the first quarter, when stocks experienced a dismal rout and subsequent rebound. This account growth continued through the end of 2020 as stocks clawed back their losses, as young and sometimes inexperienced investors saw the coronavirus downturn as an entry point into the world of investing. Citi chief U.S. equity strategist Tobias Levkovich called the pandemic a "generational-buying moment" for those without much background in the equity space. Daily active revenue trades soared as investors were stuck at home in the absence of sports, even using their stimulus checks to trade . Piper Sandler estimates retail volumes grew 138% in the first 11 months of 2020 compared to the same period a year ago. "Even if we do see some moderation in volatility in 2021, we thin