Many financial advisors are growing concerned about becoming obsolete amid the increasing role of robo‐advisors, but American consumers do not appear ready to make the move.
In fact, a new study from the Million Dollar Round Table reveals that 56% of Americans want their finances to be handled by a mix of people, robo-advisors and other technological tools.
This majority includes 54% of human-advisor clients, 50% of robo‐advisor users and majorities of all age groups. Far from supplanting human advisors, robo‐advisors may simply be the next supplementary tool, according to the survey.
Americans see several advantages of working with human advisors. These include the opportunity to build trusting relationships (chosen by 66% of survey respondents), ease of communication (65%) and high levels of human interaction (49%).
Concerns about human advisors are not as strong, though minorities of Americans express concern about personal or financial security breaches (37%), the accuracy of financial assessments (35%) and human advisors’ response time (32%).
Stronger Worries About Robos
But robo‐advisors evoke stronger worries, with 51% of Americans expressing concern about personal or financial security breaches, according to the survey. Significant minorities of Americans also worry about minimal human interaction (42%) and hard‐to‐understand financial terminology (39%).
Impressions of robo‐advisor advantages are more muted, as 44% of Americans cite the minimized risk of human error, with another 44% listing response time, and 38% listing reduced costs.
Finance And Social Media
A whopping 68% of survey respondents also reported learning about finance and investing through at least one social media platform. Facebook led the pack, with 37% of Americans saying they use it to learn about finance, followed by YouTube (35%) and Instagram (29%).
There were stark differences between age groups: 90% of 18‐29‐year‐olds say they learn about finance on social media, compared with 81% of 30‐44‐year‐olds, 62% of 45‐60‐year‐olds and 42% of Americans over the age of 60.
Younger Americans are more likely to use newer social platforms to learn about finance too, the survey noted. Significant shares of 18‐29‐year‐olds said they learn about finance on TikTok (31%) and Discord (21%). Among 30‐44year‐olds, 24% said they learn about finance on Reddit.
“The survey results reassured me of the ongoing and future need for human financial advisors,” said Paresh Shah, a 15-year MDRT member who specializes in pension & profit-sharing plans, asset protection, estate planning and business succession. Investment advisory products and services are offered through Csenge Advisory Group, an investment advisor registered with the SEC.
“It was especially encouraging to see that more Americans see advantages to working with human advisors than with robo-advisors,” Shah added.
For example, he said, the opportunity to establish trust and build a relationship was the top perceived benefit of working with a human advisor, chosen by 66% of Americans.
“In contrast, the top perceived benefit of working with a robo-advisor, a minimized risk of human error, was only chosen by 44% of Americans, “ he added. “While technology will, and should play a bigger role in our work as time goes on, most clients will still find value in the human touch and the nuances a human perspective can provide. We are still in an era when people want to explain their problems to, and receive guidance from a real person.”
Achieving The Perfect Blend
Human advisors seeking to achieve a perfect mix of people, robo-advisors and technology must adapt and incorporate as much technology as possible into their practices, Shah said.
“The advisors who successfully accomplish this will flourish and see their practices grow, while the advisors who fail to do this will not be able to stay in business,” he added. ‘Even for robo-advisor users, there is a wide range of services from insurance to estate planning, which human advisors can provide. But we must keep up with the expectations of clients and prospects, and prove we can offer that human element on top of technological proficiency.”
The pace of technological change continues to speed up in the financial-services profession, and American consumers are taking note, the survey pointed out. As clients spread their financial needs and lives across more online platforms, advisors who adapt to the new digital reality will lead their clients and firms to greater success.
The online survey was fielded by G&S Business Communications on behalf of MDRT, and took place on January 10, 2022, with a representative U.S. sample of 1,187 adults, ages 18+, including 489 who reported having a human financial advisor and 204 who reported using a robo‐advisor.
Ayo Mseka has more than 30 years of experience reporting on the financial-services industry. She formerly served as Editor-In-Chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]