Robos, digital platforms and human financial advice: What investors really want

The following is an excerpt from a new research paper, “An adviser's guide to understanding investors' digital DNA,” that was co-developed by InvestmentNews Research and Oranj: The emergence of robo-advice and robo-investing platforms in recent years has led many traditional advisory firms to place a greater emphasis on their digital footprints. A growing number, in fact, are moving to offer digital versions of their “human” services. The 2017 InvestmentNews Adviser Technology Study, for example, showed that 7% of independent advisory firms offered a robo-advice option at the end of 2016, compared with just 3% two years earlier. At the same time, 19% of the firms that do not offer a robo-advice option intend to introduce one in 2017—nearly double the number that indicated that intention in 2015. Despite their growth, robo and digital platforms still account for a relatively small share of the overall advice market. Only about 4% of the mass affluent and high-net-worth individuals in our survey reported that they use an automated investing or robo-advice tool. For context, some 49% of individuals in our study currently use a financial adviser; the balance are self-directed investors. Those individuals who use an adviser indicated that they do so for two primary reasons: To be able to discuss their financial situation with an objective third party — cited by 40% of individuals as the No. 1 reason for using an adviser — and for direct access to intelligence around investing and the markets, cited as the primary reason by an equal number of respondents. The first factor speaks to the ongoing need for an individual who can listen and translate financial needs and goals into a personalized financial plan. This, essentially, is the primary role of a traditional adviser. The second reason—access to investment intelligence—could present challenges for traditional advisers as more individuals are introduced to lower-cost, digital and automated investing options. Many robo-advice firms, for instance, are expanding into hybrid territory in order to increase their market penetration beyond the lower levels of the mass affluent. The takeaway is that while the human element remains the hallmark of the advisory relationship—especially for the wealthiest, most sophisticated investors—advisers should still strive to deliver the digital features that a growing number of investors prefer. Download the full research brief, “An adviser's guide to understanding investors' digital DNA” now.