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Most Consumers Use Mix of Technology, Live Advice: Report

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Investors, especially affluent ones, are comfortable using digital tools in their decision making process, according to a white paper from Hearts & Wallets. Nearly two-thirds of investors with between $500,000 and $2 million use digital tools, and over half of those with between $100,000 and $500,000 do so.

“Increasing use of technology has paralleled investors’ association with self-determination in their investment decision making,” as opposed to relying on others, according to Todd Hiller, vice president of Hearts & Wallets and author of the report.

That coincides with the industry’s desire to counteract investors’ lingering distrust of financial services. In fact, Hiller wrote that investors’ identification as self-directed is “not the same as no involvement of a paid financial professional. […] Most consumers use technology and live advice together, in different combinations of frequency and purpose, depending on the segment of investor.”

Firms that integrate digital advice tools into their service offerings should state their value propositions clearly, with more detail easily accessible. The paper noted that younger investors are also “connoisseurs of design.”

Robo tools are also helping consumers beyond simply planning and investing. Research from Hearts & Wallets found that in addition to those traditional needs, investors also want tools that can aggregate and monitor their assets and motivate them to take action.

Among “accumulator” investors, 62% identified motivation as one of their top two financial needs, followed by 60% who said planning and 53% who said investing. Wealthier investors showed high levels of interest in motivation and aggregation support as well. Planning and investing were most frequently identified as the top two goals of investors in the $500,000 to $2 million segment, but 61% identified aggregation and monitoring as a top-two goal, and 59% identified motivation.

The paper noted that investors’ desire for help is fairly even across age and wealth segments. “Instead of focusing on investors who have a certain level of assets or are in a certain life stage, it is better to start with the consumers who need your solution,” Hiller suggested. “There are 38 million households who control an estimated $5.5 trillion of investable assets who ‘want help determining financial actions’ and they can be studied as a group.”

For example, investors most interested in getting advice on what financial steps they should take skew younger and female, the paper found, and are concentrated in cities. They’re fully employed and almost three-quarters are managing student or consumer debt. Over half don’t believe their employer is responsible for providing retirement savings (and 46% aren’t comfortable leaving savings in a previous employer’s plan) and their No. 1 goal is building an emergency savings fund.

Because robo-advisors are “small and nimble” compared to traditional financial services firms, “it’s easier for them to optimize through trial and error,” according to Hiller. However, “big companies can optimize too, without so much trial and error, as long as they have the proper data analytics.”

Segmenting investors into technology-oriented or advisor-oriented oversimplifies their needs. “Digital content is not the end; it is the means to solving the needs of well-defined groups of investors,” Hiller wrote.

— Read Who Likes Robo-Advisors? Not These People on ThinkAdvisor.


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