Data and Research

Investors Prefer Robo Advice with a Human Touch

Financial services firms are increasingly adopting technological tools, but consumers seem to still prefer a human face behind the machines.

By Javier Simon editors@strategic-i.com | July 07, 2017

Despite the advent of increasingly personalized technology entering the financial services realm, most people still prefer the human touch. That’s the conclusion drawn by a global investment survey by Legg Mason Asset Management. The study found that more than half (60%) of survey takers said that personal customer service is not only important, but it can never be replaced with technology. The sentiment transcended generations with 53% of Millennials and 65% of Baby Boomers agreeing.

Overall, 67% said "technology is a great tool, but I still want to know there's an expert behind it guiding me." Several respondents also reported that certain financial planning tasks like tax optimization require an expert. This was true for 64% of Millennials and 67% of Boomers. In addition, the study found that the belief that personal advice is irreplaceable is more deeply rooted in women with 65% of women sharing this belief as opposed to 55% of men.

Still, the research found some evidence backing the steady rise of financial planning technology. Twenty-nine percent of Millennials agree with the statement, "Online tools and apps are replacing the need to speak to an advisor" compared to a net 2% of Boomers.

Legg Mason notes that “Given that Millennials are just embarking on their independent financial lives, recognizing this generational difference is vital for investment advisers or managers planning their future strategy.”

In recent years, financial services companies have responded to this demand by integrating robo-advice with personal interaction. In fact, research suggests robo advisers are not necessarily becoming a threat to the financial adviser, but rather a tool in a wide range of technology and services.

The firm found that certain financial tasks may be better achieved online as opposed to others that require personal, expert guidance. A quarter of survey participants say reviewing the performance of savings and investments is better online. Of these, however, 34% still want a human leading and technology supporting. The desire for technology decreases when it comes to complicated matters such as buying a pension or creating a comprehensive financial plan with just 14% of investors doing so online.

Legg Mason reports that “financial planning activities with the highest "pure advice" components are the most likely to be favored by survey respondents: creating a comprehensive financial plan (64%); buying a pension (61%); and looking to reduce a tax bill (58%). The firm concludes that “Interestingly, these activities may be the highest-margin parts of the investment management and advice business.”