Americans Seek Diversified Investments and Advice

Affluent investors seek out advice from multiple providers because they are hesitant to trust a single source, a new analysis suggests. 

Results of a new Hearts & Wallets analysis suggest advice is not a zero-sum game; participants are happy to pay for advice that is worth getting, whether it is delivered face-to-face or via a digital platform.

At a high level, affluent older Americans have increased use of both digital and live advice resources, according to Hearts & Wallets. As a result, more investors are needing to carefully blend and incorporate different sources of advice to which they may assign different levels of trust and confidence.

The study, “How Older Affluent Investors Blend Live and On-line Advice & Reactions to BIC and Concepts for Aging,” shows one in four older affluent investors use both digital resources and a paid financial professional. Digital use is growing for all older investors, researchers note. In particular, digital use jumped 8% in one year for late career investors ages 53 to 64.

“Older investors have a growing appetite for both digital and live advice,” says Laura Varas, Hearts & Wallets founder and CEO. “Blending behavior spikes for emotionally charged, high-impact decisions like optimizing Social Security when no one source provides confidence.”

As financial services providers build solutions for older investors that incorporate some aspect of technology, Hearts & Wallets argues they should “understand the different types of older investors, the widely varying ways they use digital and live advice, and what they’re willing to pay for.” 

Out of 59 million older U.S. households with $32 trillion in investable assets, the study focuses on affluent consumers with savings of $500,000 to $5 million, who are most likely to blend online resources and paid financial professionals. In total, this market represents 4.5 million households with $8.5 trillion in investable assets.

According to Hearts & Wallets, nearly 2 million households in this group “sometimes” use digital online planning tools, company websites or mobile applications as sources of investment information and advice. About 1.5 million households report no use of digital advice, while approximately 700,000 households identify as “primary” or “usual” digital advice users.

NEXT: What’s worth paying for?

“As more sources of information and advice become easier to use, consumers are asking questions and becoming choosier about what’s worth paying for,” the analysis argues. “There’s also a growing preference for flat fees for specific financial services instead of a percentage that may become harder for the financial services industry to ignore.”

Interesting to note, although attitudes about what’s worth paying for vary in important ways by behavioral group, Hearts & Wallets finds most investors “would pay for help for at least one investment, income and tax optimization task, and often more.” 

“The real value is no longer investment selection,” Varas emphasizes. “When consumers choose to pay for help, they are buying the emotional benefits, such as peace of mind and confidence in broad and deep expertise, that come from services, not investment alpha per se.”

The study concludes that consumers are “also willing to pay for help avoiding pitfalls.” For example, heavy digital advice users believe certain tasks are worth paying for under certain circumstances, such as settling family disputes.

Another emerging trend is the sizable group of investors who use the term “passive” to describe themselves as investors. Because “passive” investing, or indexing, has received so much favorable news coverage, they use the term to describe their disengaged behavior with positive connotations, according to Hearts & Wallets.

“The investor who describes him- or herself as ‘passive’ is deliberately disinterested. He or she doesn’t mean an affinity for index funds,” Varas adds. “To connect with this group of consumers, providers need to develop positive emotional ties to being more engaged in their finances, regardless of what mix of passive or active investments is used.”

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