The Lowdown on Robo-Advisors

The trend toward online investing and advisory services, also known as robo-investing and robo-advice is gaining momentum, but industry participants are struggling to get a handle on how retail investors view and/or use robo-services to conduct their financial affairs.

Studies Abound

Recent research conducted by major asset management firms has gleaned insight, yet often their findings turn up contradictory information. For instance, one study conducted by State Street Center for Applied Research found that 65% of retail investors believe that technology will do a better job at meeting their needs than human advisors.1 Other research conducted by Allianz Life®, which focused on generational approaches to investing and managing finances, revealed more complex attitudes.

Case in point: When baby boomers and Generation Xers were asked about using robo-advisors, a significant majority (69%) from both demographi c groups said they "don't really trust online advice." Further, 76% opined that "there is so much selling online that it's hard to trust the financial advice."2

The same study revealed that while more than a third of respondents expressed some interest in working with a robo-advisor, just one in 10 would be comfortable having a relationship with an advisor that existed solely online.2

Yet as technology evolves and financial information proliferates online, investors are spending more time on financial websites, with 40% saying they visit such sites regularly, 13% go to financial sites daily, and 22% do some trading online. Among this group there appears to be a growing comfort level with the robo-experience, as 42% stated that "there's nothing a financial advisor can tell me that I can't find out online."2

A Push-Pull Message

Indeed, study after study on the emerging impact of digital advice is finding widespread ambivalence on th e part of investors. On one hand, they are increasingly comfortable with getting their financial information and conducting more business through digital channels, while on the other, they still gravitate toward human relationships when dealing with complex "big picture" planning issues such as meeting their income needs in retirement and setting and managing other long-term financial goals.

Still in its infancy, the world of Web-based financial services will no doubt evolve and present exciting new developments in the future.

This communication is not intended to be investment advice and should not be treated as such. Each individual's situation is different. You should contact your financial professional to discuss your personal situation.
 

Source(s):

1.  financial-planning.com, "Can Advisors Rebuff Challenge o f Automated Investing?" February 25, 2016.

2.  Allianz Life®, ' "Robo" Financial Advising on the Rise, But Gen Xers and Boomers Still Prefer the Human Touch,' February 16, 2016.

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Rep roduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.