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Investors Want Both Humans and Robo-Advisors

July 1, 2015

According to a recent Gallup poll, almost two-thirds of U.S. investors want their financial advice from a mix of human and robo-advisors.

But only 26% want it to come predominantly from automated services, and just 9% want it to be robo only. Meanwhile, 39% of investors want advice to come mostly from humans, and 23% would want advice solely from human advisors.

Also, given a choice of only one of three sources for financial advice, half of investors polled said they would choose a good relationship with a human advisor — while 24% said they would pick the top digital or online tools, and 19% opted for on-call access to physical advisors.

Still, investors have embraced digital tools, with three quarters saying they use them either a little (19%) or a lot (57%). In part, it’s because of supply: 85% of investors said their main financial institution offers some digital investing services.

And despite human advisors getting preference over their digital counterparts, when rated separately they’re almost equally important to investors. Seventy percent said relationships with human advisors are very or somewhat important to them, while 71% said that access to online or digital investing services is very or somewhat important to them.

The young are much more welcoming of our robot overlords: While only 69% of investors 50 years old and over said they use digital investment advice, the figure rises to 84% for investors under 50. And 83% in this age group consider access to digital services important, compared to 61% for investors 50 and older. Older investors are twice as likely as younger ones to prefer all their financial advice to come from a human being, but the majority of younger investors (three quarters) still want a strong relationship with a human advisor, reveals the poll. And even though the use of digital technology will only increase in the future, the poll suggests that even younger investors, and certainly older investors, view digital and human advisors as complementary.

Digital tools such as Charles Schwab’s recently unveiled robo-advisor, the no-fee advisory platform that attracted $1.5 billion in the first six weeks of existence, are unlikely to replace humans, Scott Martin writes in The Trust Advisor. Feared by many as targeting and eventually eating away at the high-net-worth investors market — in addition to the mass-affluent investors robos are typically geared for — the Schwab robo-advisor platform will allow advisors to give up the rote work of populating and balancing portfolios. But such a cookie-cutter solution is not going to appeal to high-net-worth investors. Nonetheless, tools like Schwab’s, and like Merrill Lynch’s Edge platform, should give advisors incentive to evolve, Martin writes.

By Alex Padalka
  • To read the Trust Advisor article cited in this story, click here.
  • To read the Gallup article cited in this story, click here.