Add live chat rooms to the list of places where young investors are paying for stock tips.

Popular trading apps and social-media platforms including Reddit, TikTok and YouTube have helped to create a wave of amateur traders online. Now apps that host live chat rooms dedicated to investment topics are attracting large audiences, too.

Chat startups such as Discord Inc. and Telegram Messenger Inc. are drawing users looking for faster-paced, real-time conversations with other investors as they follow market trends or seek investment advice. Conversations often begin with a user posting a general question about a stock, or announcing they are buying or selling a stock. Fellow members of the group, discussion-group leaders or other staff then respond. Conversations tend to run quicker than message-board exchanges, are more private and can be more engaging than prerecorded videos. Discord servers, for example, use invitation links and can’t be searched and found as easily as communities on Reddit.

Discord got its start in 2015 as a messaging service for gamers, but has since tapped into a wider audience of people with shared interests, including music, technology and now, investing. The company, which says it has more than 140 million active users, recently attracted suitors including Microsoft Corp. Discord has ended those talks and is considering an initial stock offering. 

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While Discord offers its chat service free, some users of the investing-themed communities on its platform gain access to their groups through subscription fees paid via third-party payment services that Discord doesn’t control. Such fees typically range from around $20 to $100 a month. Subscription fees also buy perks such as trading alerts and opportunities to follow and get tips from traders affiliated with the community who give advice on how to execute a trade and their thoughts on certain stocks. On Telegram, meanwhile, people also talk about stocks on user-run channels. Some channels charge fees to follow trades or get alerts on things like moves in the foreign-exchange market.

Clubhouse, a fast-growing live audio chat-room app, by contrast, has many rooms dedicated to investing, but for now there are no fees involved. People who run these conversations are trying to build up followers that may eventually enable them to get paid for their advice on the app.

From the thousands of Discord and Telegram communities that are dedicated to stock investing, The Wall Street Journal looked at more than a dozen with numbers of users generally in the low thousands but ranging to more than a hundred thousand.

Telegram and Clubhouse didn’t respond to requests for comment.

Tyrell Dukes says the Next Gen Investors founders don’t make trading recommendations. Instead, he says, community members pay to receive alerts about their investing plays and basic explanations about options trading.



Photo:

Rita Harper for The Wall Street Journal

“Finance is one of the many topics that has been rising in popularity on the service,” a spokesperson for Discord says. “We are always excited to see the creative and unconventional ways people are using Discord, and this includes the broad variety of personal-finance discussions, from investment clubs and day traders to college students and professional financial advisers.”

Discord is more popular in the U.S. than Telegram.

Anthony Bartolacci,

director of sales, financial institutions at analytics firm Sensor Tower Inc., says Discord’s recent growth is largely driven by the same forces that have boosted mobile gaming—people trapped at home by the pandemic and looking for something fun and interesting to do. The company’s active mobile users for March were up 75{06d6670df80e02c0b1a51bdfaefb71b6e69ecb50fe99d893294764e2911a48c2} from the year-earlier period, according to Sensor Tower. In January, Discord ranked No. 2 behind

Facebook

for average number of minutes spent by adult U.S. users on social-media networks, according to Verto Analytics.

The growth of live-chat apps focused on trading could signal the start of a broad shift among young consumers to messaging-based apps for more types of financial services, says

Elliot Goykhman,

chief executive and founder of Zelf Inc., a digital-only banking startup that runs on four chat apps, giving customers the ability to use messages, buttons or voice commands to perform basic banking tasks like sending money, checking balances, creating invoices and more. Zelf, a U.S. financial technology firm that operates in Europe through a Latvian subsidiary, plans to offer its services on Discord and iMessage soon. Since its launch in August 2020, Zelf has drawn more than 500,000 sign-ups by consumers who receive digital cards once their country is covered by the service. More than 70{06d6670df80e02c0b1a51bdfaefb71b6e69ecb50fe99d893294764e2911a48c2} of those signing up are part of Gen-Z, or born from the mid 1990s to early 2010s.

Many investing-focused communities using Telegram and Discord post disclaimers saying they are not registered investment advisers and aren’t qualified to give financial advice. Some that charge fees say they are providing entertainment.

“Our website and social-media profiles are for entertainment purposes only,” says Eagle Investors on its Discord server, a community that has close to 100,000 users. Fees for using Eagle start at $37 a month for access to its trading chat, stock and options alerts and “strategy and education.” The community also warns users as part of its disclaimer: “Never invest in any security or cryptocurrency featured on our site or emails unless you can afford to lose your entire investment.”

A smaller community that uses Discord, Next Gen Investors, with more than 4,000 members, focuses on high-risk options trading and charges $26 a month to follow community leaders such as 25-year-old

Tyrell Dukes.

Mr. Dukes studied financial management in college and is one of four men in their 20s who founded and run Next Gen Investors. Mr. Dukes says he and his colleagues don’t make trading recommendations; instead, he says, community members are paying to receive alerts about the leaders’ investing plays as well as basic explanations about options trading.

Another benefit that users receive, Mr. Dukes says, is access to a community of like-minded investors to increase engagement and build a support system. Investors who use Discord and other social-media platforms, Mr. Dukes says, gain knowledge to make informed decisions, pay lower fees and generate higher returns compared with paying a financial adviser to manage their portfolios.

“This is a new wave of investors,” Mr. Dukes says. “I think you’re going to slowly start to see these traditional advisers die off” because of these online communities.

Tyrell Dukes says the members of the Discord investment chat rooms are a “new wave of investors.”



Photo:

Rita Harper for The Wall Street Journal

Unsurprisingly, many financial advisers dispute that prediction.

“There is zero threat to the wealth-management profession when it comes to trading communities because, when done right, the value that comes from working with professionals is deeply rooted in individualized financial planning and tailored financial advice,” says Douglas Boneparth, president of New York-based Bone Fide Wealth LLC, a millennial-focused financial advisory practice. “Investments are just one part of people’s financial lives.”

Jacob Gold,

an associate professor of finance at Arizona State University who also runs a financial advisory practice, says that without guidance from an experienced adviser, young people who see windfall stock trades online could end up damaged in the long run because they will think big gains are a normal occurrence. “The more someone makes 30{06d6670df80e02c0b1a51bdfaefb71b6e69ecb50fe99d893294764e2911a48c2} in a day off

GameStop

or Tesla, their behavioral finance is beginning to assume that this is just the way people invest,” says Mr. Gold. That can lead people to take riskier bets and get burned. “I feel sorry for the people who buy into that because it’s false hope,” he says.

Corrections & Amplifications
Clubhouse is a live-chat audio app. A previous version of this story incorrectly called the app Clubhouse Software Inc. (Corrected on May 5.)

Mr. Holger is a reporter for The Wall Street Journal in Barcelona. Write to [email protected]

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