Advisers Using Robo-Advice for Older and Wealthier Clients

Jefferson National survey dispels the belief advisers are only offering the technology to younger investors.

Registered investment advisers (RIAs) and fee-based financial advisers are using robo-advice for older and wealthier clients, Jefferson National found in its inaugural Advisor Authority survey.

The financial planning industry has held the belief that advisers are only using robo-advice for younger clients with lower assets under management. However, Jefferson found that among the advisers using robo-advice, 52% are using robo-advice for clients with more than $1 million in investable assets. Among the advisers using robo-advice, 49% are using it for their younger Millennial clients, and another 49% are using it for their Boomer clients.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Nonetheless, Jefferson National found that usage of this technology among advisers as a whole is low; only 19% currently use any type of robo-advice and only 15% say they are very likely to integrate this model into their practice in the next 12 months.

Even advisers who are familiar with robo-advice are split on their feelings about it, with 48% saying it poses a threat, and 42% saying it does not pose a threat.

“Our Advisor Authority study found that the most successful advisers—those who earn more and manage more assets—are forward thinkers and early adopters when it comes to using technology, including robo-advisers,” says Mitchell Caplan, chief executive officer of Jefferson National. “While there is no replacement for the value of holistic guided advice, our research demonstrates that this new generation of digital advisory solutions can be incorporated into a successful adviser’s practice to create greater efficiencies—and more value for their clients. The most successful advisers understand that rather than a threat, robo-advisers are, in fact, an important part of a comprehensive offering.”

Harris Poll surveyed 535 RIAs and fee-based advisers online on behalf of Jefferson National. The full findings can be downloaded here.

Advisers Factor Trust into Fund Purchases

Brand trust is the leading driver of mutual fund purchase consideration, according to research from Cogent Reports.

Advisers depend on brand trust as a leading driver of mutual fund purchase consideration, and American Funds, Franklin Templeton and BlackRock are the brands they trust most, according to the 2015 Advisor Brandscape report from Cogent Reports, a division of Market Strategies International.

According to the report, across 10 top brand attributes, the amount of trust of an adviser for an asset manager has the greatest impact on whether the adviser will consider investing with that company in the future. Cogent Reports also found that the impact of trust exceeds that of more traditional purchase drivers such as perceptions of reliability, consistency of performance, or information and guidance.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“Trust is particularly important now, at a time when the product landscape is changing so quickly,” said Meredith Lloyd Rice, senior research director at Market Strategies and author of the report. “Whether it’s new product adoption, concentrating assets with a new set of managers, or expanding the use of solutions like model portfolios, trust becomes a huge factor.”

The top 10 most trusted mutual fund companies in Advisor Brandscape are:

  1. American Funds
  2. Franklin Templeton
  3. BlackRock Funds
  4. Vanguard
  5. Fidelity Investments/Advisor Funds
  6. OppenheimerFunds
  7. MFS Investment Management
  8. T. Rowe Price
  9. First Eagle
  10. DFA

Across four of the five primary retail distribution channels, American Funds, Franklin Templeton and BlackRock are the most trusted brands. However, among registered investment advisers (RIAs) only, American Funds remains in the top three, trailing Vanguard and DFA.

“It’s clear from these findings that even some of the biggest asset managers still have their work cut out for them in building greater trust among RIAs,” Rice said. “But with so much focus on this increasingly important channel, we expect nothing less than an all-out effort to win that trust.”

Cogent Reports conducted an online survey with 1,390 financial advisers between January and March. Survey respondents were required to have an active book of business of at least $5 million and offer investment advice or planning services to individual investors on a fee or transactional basis.

More information about the Advisor Brandscape survey, including purchasing information, is here.

«