Robo-advisors are gaining traction — and praise — among mass affluent investors in the U.S., according to a new report from Chicago-based Sprectrem Group.
The report, entitled Wealthy Investors and Their Perceptions of Robo-Advisors, found that 56% of investors with $100,000 or more in assets who utilize a robo-advisor did not have a prior relationship with a financial advisor. As well, 64% of investors over the age of 61 sought investment advice for the first time through a robo-advisor, which suggests it’s not only millennials who are taking note of these start-ups.
“Our research consistently shows that robo-advisors are becoming increasingly accepted by wealthy investors,” says George H. Walper, Jr., president of Spectrem, in a statement.
Some investors are even trying out robo-advisors at the suggestion of their advisors. Case in point: 46% of robo-advisor users said they had placed a portion of their assets in an account on the suggestion of their advisor. The report notes that advisors who made these recommendations were at firms with their own digital wealth-management platforms.
In some cases, these mass affluent investors see robo-advisors as surpassing traditional forms of advice. For example, 30% of investors said they believe robo-advisors do a better job than an advisor in picking stocks to meet risk tolerance while 28% said the same of selecting investments for retirement plans.
Still, not every investor is interested in working with robo-advisors. For example, 49% of investors who don’t use a robo-advisor said they prefer to work with traditional advisors because of the personal attention they provide.
Indeed, that personal touch will remain an important differentiator for advisors as robo-advisors become more widely accepted and used among investors.
“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,” says Walper Jr. “By staying in close touch with the evolving needs of their clientele and adjusting investment strategies accordingly, advisors can play to their strengths, while also recommending technology based platforms for certain tasks.”
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