Data and Research

Combined Human and Robo Advisers Show Promise

A report from Charles Schwab finds working-age Americans are warming to financial advice that is delivered through a combination of personal interaction and technology tools.

By John Manganaro editors@strategic-i.com | May 12, 2015
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Fully nine out of 10 Americans view technology as “more of a life necessity than a distraction,” Charles Schwab finds in a new survey report, “Man and Machines,” and this thinking applies directly to financial advice and the challenging process of planning for a successful retirement.

Schwab identifies increasing trust and passion for technology across generations in the United States, especially when it comes to dealing with daily financial tasks and managing money for the long term. While the data set focused on several thousand affluent consumers, the findings are telling for the wider investment advice marketplace—in part because affluent investors are often cited as favoring personal adviser relationships over technology.

In the sample of affluent investors, just over half (54%) said they prefer to rely on technology for problem solving, including for financial issues and plan-making, while 46% still favor interactions with professionals or people they know or to whom they are referred. Notably, the report finds age “is not a defining factor in how people approach the use of technology.”

While the majority want technology to play a role in financial and general decisionmaking, when asked to choose between relying on only a financial adviser or only a computer algorithm for managing their portfolios, two-thirds (66%) of all respondents say they still prefer the human touch. Generation X is just as likely as Millennials to prefer a portfolio based on a computer algorithm, at 40% each, versus only 30% of Baby Boomers and 24% of the Silent Generation. (See “Finding a Middle Ground in Robo-Adviser Debate.”)

Charles Schwab’s study also found that Gen Xers appear to be even more plugged in than Millennials when it comes to investing and portfolio management. Gen X is more likely to rely on technology when trading stock and when creating or maintaining a financial plan, for example, while Millennials appear to be seeking alternatives to technology. Millennials are more likely than any other generation to “feel relief from leaving their devices at home when vacationing,” and they are more likely to turn toward familiar sources, such as their parents, instead of seeking answers online for financial matters.

“We’ve come to accept as fact that Millennials are hyper-focused on using technology and the Internet for all their needs, but it’s clearly more complicated than that,” says Naureen Hassan, Charles Schwab executive vice president and head of the Schwab Intelligent Portfolios, an automated investment advisory service launched this year by the firm.

Hassan noted that, similar to other studies, Charles Schwab’s new research indicates that Millennials are far more likely than the older generations to put money that isn’t immediately needed into a savings account (38%). This figure is only 13% for the Silent Generation, 21% for Boomers and 28% for Generation X. Hassan says Charles Schwab, like other investment services providers, is working to “find a way to get this generation started on the path to investing, and that will require more than a pure technology-based approach.”

Up Next: Common Ground Between Millennials and Gen X