Retired Investors and Robo-Advisors: A Working Relationship



In the beginning, Robo-advisors were used primarily by young investors with limited investable assets who were accustomed to running their entire lives in digital format or expecting to do so.

The expansion of Robo-advisor services, and the possibility of receiving legitimate investment service from a digital, algorithm-based format, created an expanded market of clients for automated investment platforms.

But Robo-advisory services are still considered a format geared toward less complicated services like basic asset accumulation and management. As such, Robo-advisor services are perfectly aligned with the needs of many if not most retired investors.

“Spectrem research shows that many investors believe Robo-advisors can perform the duties of a financial advisor as well as or even better than a personal human advisors, but there are others who believe Robo-advisors have limitations,’’ said Spectrem president George H. Walper Jr. “Whatever limitations exist, they are less likely to affect retired investors who have a more static portfolio and are involved in less complicated investment procedures, which Robo-advisors can do as well as personal advisors at a much lower cost.”

Spectrem’s new study on Robo-advisor users – Robo-Advisors 3.0 - surveyed only those investors who currently use a robo-advisor and found the market for robo-advisors is low among retired investors but they do have their appeal among investors who are done working for a living.

According to Robo-Advisors 3.0, only 18 percent of Robo-advisor users are retired investors. Those retired investors are more likely to use one of the more established Robo-services such as Fidelity Go, Vanguard Personal Advisor Service or Schwab’s Intelligent Portfolio than to use some of the emerging services like Betterment or Future Advisor. The reason is likely to be the availability of access to a human advisor when needed. Even in its most basic package of services, Schwab Intelligent Portfolio users are able to access a human advisor when they need to, although it will not be the same advisor with each communication.

The research backs up the idea that retired investors prefer using established providers for their Robo-advisor uses. For example, 34 percent of retired investors who use Robo-advisors use Fidelity Go and 30 percent use Schwab Intelligent Portfolios (compared to 16 percent of working investors).    

It is also important to note that 21 percent of retired investors said the availability of a Robo-advisor offered by the provider of their personal advisor services prompted them to sign up for the automated product.

Among the most popular reasons retired investors choose to work with Robo-advisors is the lower fees compared to those charged for personal advisors, and the unbiased approach Robo-advisors provide. But 13 percent also said the availability of a human advisor as part of the Robo-advisor package of services was important.

Providers of Robo-advisor services have no desire to offer the product to just young investors. They have worked to create a system that can be used by older, less tech-savvy investors who are in the market for a lower-cost financial advisor. Retirees can find less expensive services and a transparent advice module from Robo-advisors.



©2018 Spectrem Group