Affluent Investors ‘Test Driving’ Robo-Advice

Research findings published by LIMRA Secure Retirement Institute suggest some affluent investors are test driving robo-advisers and shopping around for the best tech-enabled wealth management. 

Conventional wisdom in the advisory industry has it that wealthier clients are less likely to choose digitally delivered investing services driven by automation and computer algorithms—favoring instead traditional face-to-face services from an advice professional.

Not so, according to new research from LIMRA Secure Retirement Institute, which casts some doubt on the notion that wealthier clients are uninterested in robo-advisers. LIMRA finds automated advice is also clearly appealing to a significant proportion of affluent investors—those with $500,000 or more in assets—many of whom are “test-driving various robo-advisers with smaller sums to see if this is a viable option going forward.” 

The findings are shared in LIMRA’s new Industry Trends post, “Even With Low Consumer Awareness, Robo-Advisor Potential Remains High.” Beyond highlighting affluent investors’ growing interest in robo-advice, the research shows 81% of all consumers surveyed were “unfamiliar with automated investment platforms.” Despite current low awareness among U.S. consumers generally, LIMRA says the potential growth of robo-advisers remains high and will only increase moving ahead.

Looking at early adopters of this technology, the research finds some other indicators are more informative than wealth level when predicting interest in tech-enabled services. Unsurprisingly, age is an important factor, with current users of robo-advice skewing younger than the general population. Also critical is one’s disposition towards technology overall, with those who are more comfortable using technology obviously being more likely to adopt robo-advice—whatever their wealth level.

LIMRA notes that while financial professionals might have initially seen robo-advisers as a threat, large investment firms are adopting the technology specifically to help advisers expand their markets and business reach. 

“Advisers who include robo-advisers as part of their practice can better serve today’s consumers who want an omni-channel experience with financial services,” LIMRA concludes in its post.

(Also see, “Why You Can’t Ignore New Adviser Technologies.”)