Investors reject robo-advice

A Wells Fargo/Gallup Investor and Retirement Optimism Index survey – which interviewed a “nationally representative sample” of US consumers with more than $10,000 invested in various asset classes in June and July – has assuaged concerns that the financial advice profession may be under threat from financial information websites and so-called 'robo-advisers'.

The survey found that 44 per cent of investors are likely to obtain advice from a financial adviser when investing or planning for retirement, compared with only 20 per cent who are likely to use an “online financial planning or investing website”.

A greater number even expressed a preference for “call centre” financial advice (35 per cent) or receiving advice from friends or family members (29 per cent) over opting for the online robo-adviser model.

High net worth individuals with more than $100,000 in investments were found to be the most likely to opt for a professional financial adviser (53 per cent), along with retirees.

However, the report also found a “strong generational skew”, with 66 per cent of pre-retirees expressing “some level of comfort”with online tools compared with 35 per cent of retirees who did so.

Twenty-one per cent of survey respondents indicated they are unlikely to use any of the four financial advice options offered in the survey, indicating potential market growth for both financial advisers and online financial advice tool entrepreneurs.

“The [survey] shows that the great majority of investors feel they need expert advice to help them invest in the stock market, and the desire for professional input would likely to greater when advice needed for other types of financial matters (such as planning for retirement, college expenses and healthcare) is factored in,” said Gallup Poll senior editor Lydia Saad, in a statement reflecting on the survey results.

“This shouldn’t be an either-or situation,” Ms Saad said. “Investors who want the best of both worlds can probably get it by seeking a partnership with financial advisers who are tapping into the same powerful analysis tools being offered to consumers online.

“In fact, such a marriage of humans and computers could be a strong selling point for the financial services industry – bridging consumers’ reluctance to go it alone with their desire for a human connection and the best possible performance for their investments.”