Robo-Advisor Users Might Be Wealthier, Older Than Expected
While not the disruption many had anticipated, robo-advisors are being embraced by affluent Americans of all ages.
According to a study of investors with more than $100,000 in net worth by Chicago-based Spectrem Group, the average “wealthy” robo-advisor user is 48 years old.
While robo-advisor users are still younger than non-users, who averaged 62 years old, the age diversity of digital advice adopters eclipsed that of non-users. While 58 percent of non-adopters were over the age of 62, just 22 percent of robo-advisor users were from the same age group. Just 9 percent of non-adopters were under the age of 45.
Thus it makes sense that retirees made up a larger portion of those who did not use a robo-advisor, 43 percent, than of those who were using robo-advisors, 21 percent. Robo-advisor users also tended to be more aggressive investors than non-adopters.
“Our research consistently shows that robo-advisors are becoming increasingly accepted by wealthy investors,” said Spectrem President George H. Walper Jr. “To remain competitive, traditional advisors should lead with their unique expertise in establishing a financial plan and emphasize their ability to evaluate and react to world events.”
Among the robo-users, almost half were directed to use digital advice by a human financial advisor. Just 13 percent reported using a robo as their primary advisor. While 41 percent of robo-users were self-directed investors, a larger portion, 43 percent, described themselves “event-driven”—likely to seek professional advice for specific needs like saving for retirement or asset allocation.
Almost a third of the robo-using respondents, 30 percent, thought that robo-advisors did a better job than human advisors at picking stocks to meet risk tolerance, with another 27 percent responding that the job could be done equally well by a human advisor or a robo-advisor. Thirty-two percent felt that robos were as good as human advisors at selecting retirement plan investments, while 28 percent thought robos were better.
On the other hand, almost two-thirds of non-adopters (64 percent) felt that human advisors could do a better job selecting retirement plan investments, while 62 percent thought humans could do better at picking stocks to meet their risk tolerance.
When asked whether a human or a robo would do a better job of establishing a financial plan, most robo users, 66 percent, felt that a human advisor would be superior while 79 percent of those who didn’t use robos felt a human advisor would be superior.
Almost three in five robo-advisor users, 56 percent, did not have an advisor before signing up for automated advice, including 64 percent of robo-advisor users over the age of 61. Spectrem says this might indicate that affluent, older first-time advice seekers are increasingly turning to robo-advisors rather than traditional advice.
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