Data & Research January 12, 2017

Investors of All Ages Use Robo-Advisers More

Also, the Spectrem survey reports it’s the first-time investors regularly utilizing the technology instead of employing human advisers. 
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Less than a decade after the introduction of robo-advisers, a new study by Spectrem reveals workers are utilizing the technological advice more than human advisers.

The report, titled Wealthy Investors and Their Perceptions of Robo-Advisors, surveyed investors with a net worth larger than $100,000, and found that almost a third believe robo-advisers are more efficient than human advisers in choosing stocks for risk  tolerance (30%) and picking investments for retirement plans (28%).

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The survey reported that 56% of investors who currently employ a robo-adviser never consulted with advisers before using the service. Sixty-four percent of those users were over the age of 61, meaning that older first-time investors would rather utilize robo-advisers. The report notes that while younger investors, such as Millennials, may be most likely to turn to the service, the average wealthy investor using robo-advisers is 48 years old, and more than 20% of those surveyed are over the age of 61. Additionally, 16% of those older users employ robo-advisers as their primary source in advice-seeking.

However, not everyone is a fan of the technology-based advisory solution. The study reports that among non-robo-users, 49% say they do not utilize a robo-adviser because of a lack of humanized attention.

While the report highlights robo-adviser usage, it also indicates how human advisers are accepting the increased utilization. Almost half (46%) of wealthy investors suggested their traditional adviser recommended using the technology offered by the firm for a share of their assets, in order to lessen fees and simplify the investment process.

“Our research consistently shows that robo-advisors are becoming increasingly accepted by wealthy investors,” said George Walper, president at Spectrem. “To remain competitive, traditional advisors should lead with their unique expertise in establishing a financial plan and emphasize their ability to evaluate and react to world events.”

More information on the findings can be found here. 

Data & Research January 12, 2017

ICI Argues for Protecting Tax Status of IRAs

The Investment Company Institute is making the case that individual retirement accounts are an integral part of America’s retirement savings system.
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Individual retirement accounts (IRAs) are an integral part of America’s retirement savings system and savers are using them strategically to help meet their retirement goals, according to survey findings from the Investment Company Institute (ICI).

A new study by ICI, “The Role of IRAs in US Households’ Saving for Retirement, 2016,” suggests that most traditional IRA-owning households have a strategy for managing income and assets in retirement and sought information from multiple sources when building that strategy.

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ICI data indicate that 76% of IRA users consulted a professional financial adviser when creating their strategy, 26% consulted a website, 24% consulted with friends or family, 23% consulted written materials—such as a book, magazine, or newspaper—and 10% used a financial software package.

“IRAs have grown in popularity among American households and play an increasingly important role in saving for retirement,” notes Sarah Holden, ICI’s senior director of retirement and investor research. “Rollovers continue to fuel recent IRA growth, and this trend demonstrates the IRA is working as designed—enabling investors to accumulate retirement savings while consolidating assets and accessing a range of financial services providers and investment options.”

While tax reform in the coming years could take a variety of paths, ICI urges lawmakers to maintain the tax-advantaged status of IRAs and other defined contribution (DC) retirement accounts that are the backbone of many Americans’ efforts to save for retirement.

NEXT: IRAs complement 401(k)s

According to ICI research, in 2016, 59% of all traditional IRA-owning households had traditional IRAs that included rollover assets. When asked about their most recent rollover, the vast majority (82%) of these households say they transferred their entire retirement plan account balance into the traditional IRA.

Nearly nine in 10 traditional IRA-owning households with rollovers made their most recent rollover in 2000 or later, including 74% whose most recent rollover was in the past 11 years.

“Households cited multiple reasons for rolling over accumulations from their employer-sponsored retirement plans to traditional IRAs,” ICI observes. “For example, 64% did not want to leave assets with their former employer and 63% said they wanted to preserve the tax treatment of the savings. Fifty-eight percent of the households surveyed rolled assets into a traditional IRA to increase investment options and 57% indicated they wanted to consolidate savings.”

Survey data also showed most households researched the decision to roll over money from their former employer’s retirement plan into a traditional IRA with some level of sophistication, with 67% of households consulting multiple sources of information before making the move. 

Other findings show 25% of traditional IRA-owning households surveyed in 2016 had taken withdrawals in tax year 2015, and nearly 90% of them were retired. Most of the withdrawals were required minimum distributions (RMDs).

The full analysis is available for download here. 

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