There’s sharp division between younger and older investors in their approach to financial advice, according to new research from the Financial Industry Regulatory Authority’s (FINRA) investor education arm.
FINRA Investor Education Foundation’s new report, released on Tuesday, provides a detailed analysis of 2,000 investors with non-retirement accounts and finds that 38% of investors between the ages of 18 and 34 have used “robo-advisors” compared with just 4% of investors aged 55 and over. Similarly, only 22% of investors over the age 55 had heard of the concept of crowdfunding vs 58% of investors aged 18 to 34.
Perhaps surprisingly, the survey found that 61% of younger investors are worried about falling victim to fraud compared with just 28% of older investors.
The study also reports that, overall, 56% of survey participants say they use a broker or financial advisor. Of those with an advisor, the primary reasons are either to improve investment performance (81%) or to avoid losses (78%); meanwhile, 43% say that they are worried that sales incentives present a conflict of interest.
The research also found that investor literacy remains relatively low as only 10% of survey participants correctly answered at least eight out 10 questions on an investor literacy quiz while 56%, failed the test outright. Furthermore, women performed worse than men, on average.
“On a 10-question investor literacy quiz, on average, men answered 4.9 questions correctly compared with 3.8 for women,” says Gerri Walsh, president of the FINRA Investor Education Foundation. “Interestingly, both genders got the same number of questions wrong, at 3.4. But women were significantly more likely to say they did not know the answer to a question compared with men, perhaps pointing to differences in investor confidence by gender.”
The research found that stocks remain the most popular holding (74%), followed by mutual funds (64%) and bonds (35%). ETFs are held by 22%, while 15% say they also hold more esoteric products such as REITS, options, private placements, or structured notes, while 12% have commodities or futures in their accounts.
Photo copyright: pressmaster/123RF