Millennials Prefer Traditional Financial Advisors Over Robo-Advisors

While robo-advisors are rising in popularity and are projected to handle $8 billion of all global AUM by 2020, a new poll finds that a significant majority of Millennials still prefer a real-life financial advisor to make decisions.

The poll commissioned by LendEDU shows that a large part of this reasoning comes down to trusting a human more than a robo-advisor. Sixty-nine percent of Millennials believe a human advisor would generate a better return on their investments compared to 31% who believe that the better ROI would come from a robo-advisor. Note that this comes from the generation that grew up using computers, iPads and iPhones, and downloading apps.

Similarly, 62% of poll participants believe that robo-advisors were much more likely to lose their money than were traditional advisors, while nearly 38% of Millennial investors thought a financial advisor was more likely to lose their money.

When asked whether they were actually using a financial advisor, 46% of Millennials responded that they are using one, but perhaps more telling is that only 24% said they have used a robo-advisor. Of the nearly 76% who have never used a robo-advisor, nearly 62% said their reason was because they have never heard of robo-advisors, suggesting that a better marketing strategy among this group could generate a sizeable number of new customers, the report notes.

In considering the benefits of either a robo-advisor or traditional financial advisor, the poll shows that there were few major discrepancies between the two groups. Not surprisingly, accessibility was the biggest advantage for robo-advisors over human advisors. The poll shows that nearly 28% of Millennial respondents said they preferred robo-advisors because of their around-the-clock accessibility, while only 18% said the same of financial advisors.

Interestingly, cost efficiency was nearly identical between the two groups, coming in at approximately 15% for both robo and traditional advisors. The report suggests that while traditional advisors may be more expensive, in the eyes of Millennials using a traditional advisor, the cost may be well worth it if humans can offer them more than robo-advisors.

The biggest discrepancy occurred over the respondents’ view of how easy (or difficult) it is to get started with either a financial advisor or a robo-advisor. The poll shows that nearly 54% said a traditional investment advisor made it easy to get started, while only 38% said the same of robo-advisors.

For those respondents not using a traditional advisor, the biggest hindrance came down to affordability. The results show that 27% believe the benefits were not worth the costs, while another 37% responded that they cannot afford a financial advisor. Nearly 25% responded that they were confident handling their own investments, while 10% said they did not trust financial advisors.

The data in the report was based on an online poll conducted by Pollfish Aug. 10-11, 2017, comprised of 502 Millennial respondents age 18-34 who consider themselves to be currently saving for retirement.

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