Digital Advice Preferences May Not Be What You Think

When assessing the overall opportunities available to digital advice platforms, there appears to be a fairly straightforward inverse relationship between age and interest, but that pattern doesn’t necessarily correlate when combining age and wealth cohorts, new research shows.

In a follow-up to its 2015 research exploring the evolution of digital advice, Cerulli Associates finds that investors’ interest in using digital advice platforms has increased modestly, far outpacing actual adoption, but there continues to be a strongly negative correlation between age and interest.

According to Cerulli, when it initially examined whether potential investors are open to a purely online relationship in 2015, there was a “clear inverse relationship” between an investor’s age and their willingness to engage with purely digital platforms. Those findings still hold true in the third quarter 2017 data, where investors ages 30-39 showed the greatest enthusiasm, with 72% of investor respondents expressing comfort using online advice. But that level declines steadily across higher age cohorts, to a low of 21% among those ages 70 and older.

However, when examining investors’ inclination to use these platforms from an age and wealth perspective, a slightly more nuanced result appears. Cerulli’s research shows that while the age 70+ segment is least welcoming of digital advice, more than one-quarter of this age group with $2 million-$5 million would consider online-only engagement.

“This tells us that instead of solely considering the emerging investor market, providers should consider incorporating digital platform features that address the concerns of those approaching, or in, retirement,” explains Cerulli’s Scott Smith.

When looking strictly from a wealth perspective, those in the $2 million-$5 million segment grew from 38% in 2015 to 46% in 2017, while those with more than $5 million increased their openness to online advisory relationships from 30% to 38%. Interest in lower wealth tiers, however, was less enthusiastic, with investors in the $1 million-$2 million cohort signaling reduced interest, dropping from 35% to 33%.

“While interest in lower wealth tiers was more muted, investors with more than $2 million of investable assets express substantial increases in their willingness to engage with digital providers,” Smith explains. “Cerulli has seen that higher-net-worth investors are more aggressive in adding to their total number of advisory relationships, including digital, as a form of provider diversification.”

Cerulli’s research further indicates that even investors that have an interest in online only engagement frequently end up seeking traditional human advisors to round out their guidance needs. “There is an opportunity for advisors to maximize their addressable market and investor satisfaction by developing platforms that can seamlessly move between digital and human advice,” Smith suggests.

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