Millennials trust humans over robo-advisors: Study
September 28, 2017 by Nick Thornton
A new study exploring millennials’ attitudes on automated investing shows the generation that has grown up with mobile devices as appendages actually prefers human advice when it comes to saving for retirement.
And no, the data wasn’t generated by a brokerage firm or wire house.
Rather, it comes from LendEDU, a Delaware-based start-up launched by debt-saddled millennnials that has created a clearinghouse for refinancing student loans.
The firm polled 500 millennials actively saving for retirement. A little less than half were working with an investment advisor. And only a quarter was enrolled on a robo-advisor platform.
The reasons for low robo enrollment varied. Of those not enrolled in a robo-advisory service, 62 percent said they didn’t know what robo-advice is.
But the survey also revealed considerable suspicion over automated investing. Two-thirds said robo-advisors were more likely to lose their money, compared to 38 percent that said a human advisor was.
The study also showed millennials value human advisors in spite of their higher costs—nearly 70 percent said a human advisor would deliver a higher return on investment, compared to 31 percent that said as much of robos.
“Millennials will hand over their trust to technology when they need directions, the weather, or the answer to 5,678 x 75,003, but not when they are looking to turn $10,000 into $100,000 via Wall Street,” the report says.
Robo-advisor platforms market user experience along with access to lower-cost investment advice.
So far, that messaging isn’t synching with millennials. About 54 percent that work with human advisors said getting started on a savings path was easy. But only 38 percent said their robo platforms made it easy to get started.
About 28 percent of robo users said they preferred automated investing because of 24-hour, seven-day a week access to advice.
Of those not working with an advisor, 37 percent said they couldn’t afford the fees; another 28 percent said the human advice wasn’t worth the cost.
About four in 10 characterized hiring an advisor as an intimidating experience: 33 percent said they were not sure where to hire an advisor; 29 percent said they feared being scammed; and 23 percent feared being overcharged.
