When considering the benefits of using either a robo-advisor or traditional financial advisor, a new survey finds that some generations are more open to robo-advisors than others.
According to the latest MagnifyMoney survey of nearly 1,600 Americans, nearly two-thirds (63%) of consumers are open to using a robo-advisor to manage their investments. Perhaps because they grew up at the onset of the digital age, Millennials are the most open of all the generations at 75% of respondents, compared to just 43% of Baby Boomers.
Additionally, men (69%) are more likely to consider using a robo-advisor than women (58%). Also, the higher one’s income, the more open they are to using a robo-advisor. In this case, six-figure earners (56%) and Baby Boomers (50%) are most likely to have one. Only 32% of those who make $100,000 or more say they are not open to using one. Robo-advisor services are generally less personalized, so it’s interesting that the highest earners—likely those who can invest the most—are more open to it, the authors observe. Yet, despite this willingness, the survey also found that just 1% of respondents with investments say they use a robo-advisor.
Looking more broadly, 41% of consumers with investments have a financial advisor. Not surprisingly, the biggest reasons for enlisting the help of a financial advisor include helping managing money and finances (65%); helping with retirement (49%); discussing money goals (47%); and helping manage investment risk (45%).
As for how they get that help from their advisor, a large majority of those with financial advisors (79%) say they communicate via phone, while 62% say they communicate with their advisor in person. Communication via email (66%) is more prevalent than text (36%), with few still interacting via fax (4%).
Of those Americans who don’t have a financial advisor, 44% say it’s because they’re too expensive, while 43% say it’s because they manage their own investments/finances. In some cases, that may not be for want though, as 16% of these respondents say they don’t have a financial advisor but want to get one. Other reasons cited include:
- not having enough assets yet (31%);
- having yet to find an advisor they like (17%);
- being able to find plenty of free resources online (16%); and
- not trusting financial advisors (12%).
Many people also seem to think you need to have a significant amount of assets before you should get a financial advisor. Only 28% say you should get one if you have less than $25,000 in assets. Just over a third of respondents say they think you need $100,000 or more.
Even though cost is a primary reason people cite for not having an advisor, low cost doesn’t top the list of the most important qualities people want in an advisor. Trustworthiness was found to be most important, with 49% selecting it, far ahead of the 16% who cited a high return on investments and 7% who cited low cost.
And while fees are important when choosing a financial advisor, the survey found that few Americans understand them. Nearly half (49%) of respondents said they don’t know how financial advisors’ fees are structured, while 36% say they have a “vague idea” about them. Only 16% say they understand them. Millennials and Baby Boomers are the most likely to say they understand advisor fees—18% of each responded yes—while just 13% of Gen X and 11% of Gen Z respondents claim the same.
Among those without financial advisors, 8 in 10 (80%) would at least consider getting a robo-advisor if they knew it would be less costly, seemingly unaware that low-fee robo-advisors are available, the study notes.
Additional findings show that most respondents (57%) report some type of investments, be it retirement savings, stocks, bitcoin, or something else. And they’re not all that opposed to risk, the survey found. Most people with investments say their investing risk tolerance falls in the moderate range (53%), while 10% report an aggressive risk tolerance.
By generation, 44% of Baby Boomers who invest say their risk tolerance is conservative, while just 31% of Gen Zers ages 18 to 25 report the same. In the middle are 38% of Gen Xers ages 42 to 56 and 35% of Millennials.
Qualtrics conduct the survey of 1,577 U.S. consumers ages 18 to 76 on behalf of MagnifyMoney from Aug. 19-26, 2022, using a nonprobability-based sample and quotas to ensure the sample base represented the overall population.