By Daniel Lanyon on 24th August 2018
A new study examining consumer preferences has found that robo-advice and automated investment management services are overwhelmingly more popular with younger investors.
Millennials, those currently in their 20s and mid-30s, are three times more likely to use automated investment services such as robo-advice compared to baby boomers, according to research by Crealogix.
The study of 1,200 UK consumers commissioned by Crealogix, which provides digital banking solutions, found younger generational groups, in particular millennials, are substantially more open to automated financial advice and investment management when compared to more mature age groups.
Just 23 per cent of baby boomers, those born between 1946 and 1964, are open to receiving a digital advised investment service. While the numbers show the potential value in robo advice in capturing a younger audience for financial firms, it must be remembered that older investors have substantially larger average pots of cash to invest.
More than 60 per cent of millennials aged between 30 and 37 stated that they would be receptive to an automated financial service, rising to almost 70 per cent of those aged between 22 and 29.
The survey found that as age increases consumers are increasingly likely to express greater resistance to digital financial advice rather than human interaction. The Generation X demographic, those born form the mid 1960s to mid 1980s, while more open to the idea of robo-advisory services than baby boomers, are still relatively resistant with only 40 per cent in favour between ages 46 and 52.
This figure rises to 50 per cent among the younger Generation X of 38 to 45 year olds. By comparison, 68 per cent of younger millennials between 22 and 29 were receptive to automated investment management.
The different age brackets were much more in agreement in their perceived value of face-to-face time with human advisors, with 40 per cent of respondents considering it as the most important feature of using a wealth manager.
Jo Howes, Commercial Director at Crealogix UK says there is little evidence of resistance to robo-advice, especially when you look at the younger target customers.
“If anything, the resistance has come from institutional misunderstanding of the potential offered by this technology and how it can sit together with human expertise. There is a growing interest in digital-first financial services, particularly among tech-savvy young people, and most of the new brands rely in some way on robo-advisory approaches. This shift is prompting many to review their direct-to-consumer strategy.”
The automation of advisory wealth management is said by its adherents to lowers the cost of delivering investment products and allowing for lower portfolio. It is widely seen that many wealth managers are reluctant to have customers with portfolios lower than £60,000 - 100,000.
“As demand for interactive, self-service investment services grows, wealth management firms are recognising that they can exploit this technology to gain relevance in the eyes of younger clients, as well as remain competitive with their existing customer base,” Howes added.
“Robo-advisory services are heralding a positive change in the industry, closing the advice gap and expanding the market for high quality investment products. Firms should be prepared to embrace robo-advisory technologies and capabilities, and with it attract a new wave of tech savvy and financially engaged clients.”
The study was undertaken by Censuswide between 26th–29th July 2018. It interviewed 1,200 consumers aged 16 and above.