A growing number of investors are embracing robo-advisors, but are they committed to the relationship?
According to Cogent Reports, the vast majority of near-term adoption of robo-advisors will come not from Millennials but from Gen Xers, the oldest of whom are turning 50 this year. Not only is this the generation most interested in robo-advisors, it is also the group most likely to name an emerging provider for consideration, according to the report.
Nearly one-third (30%) of affluent Americans are already using some type of automated investment advice service to manage a portion of their assets, and an additional one in five (22%) are thinking about placing money with a robo-advisor in the near future.
That said, among those expressing interest, only half (51%) can name a would-be provider, according to the 2015 "Investor Brandscape" report by Cogent Reports. The report found that 17% of investors are using robo-advisor services from an established provider — Fidelity, Vanguard or Charles Schwab — while 10% are using one of nearly two dozen emerging providers. An additional 7% are unable to name their provider.
Where a robo-relationship exists, three-quarters (76%) of robo-advisor users have less than $500,000 in total investable assets; however, money invested with a robo-advisor typically represents a majority of users’ assets — 60% on average.
And while Millennials (26%) and Gen Xers (31%) make up the majority of current robo-advisor users, 4 in 10 users are either 1st Wave (18%) or 2nd Wave (19%) Boomers.
“Our research shows the factors that most distinguish those likely to embrace robo-advisors from those who will not are a much higher level of concern about the ability to save for and adequately fund retirement, and a strong desire for enhanced investment performance,” noted Linda York, vice president at Market Strategies. “These priorities coupled with a notably higher risk-profile suggest that many pre-retirees see automated investment service solutions as a good way of getting to their retirement goals. Needless to say, this could have huge implications for the IRA rollover marketplace as well as threaten the dominance of traditional target-date funds inside of DC plans.”
According to Cogent, the top 10 providers Gen X investors are likely to consider are:
1. Fidelity Investments
2. Vanguard
3. Charles Schwab
4. Motley Fool Wealth Management
5. Betterment
6. Wealthfront
7. AssetBuilder
8. Hedgeable
9. Personal Capital
10. FutureAdvisor
