New research from Cerulli Associates supports the digital/human advisor hybrid model as a way for financial firms to engage with investors early and capture assets before another advisor does, while also meeting older investors’ more complex planning needs.

Cerulli predicts millennials will inherit $30 trillion from boomers over the next several decades, according to “The Cerulli Edge — Managed Accounts Edition, 2Q 2017.”

(Related: Thinking Millennial: How to Woo the Largest Generation)

Their slightly older Gen X counterparts are pressed for both time and money, Cerulli found, making a robo solution especially attractive. Data from the Census Bureau shows that Gen Xers lost almost 40% of their net worth in the Great Recession and the following years, and are more likely to be caring for aging parents and children at the same time.

Hybrid solutions are ideal for middle-market clients with between $100,000 and $500,000 in investable assets, Cerulli found. They’ve accumulated enough wealth to benefit from more targeted advice from an advisor, but with just over 18% of households at that level, are too small a target for financial advisors.

Cerulli found that almost two-thirds of all households surveyed invested new assets with a digital provider, and almost 40% moved assets from another firm.

Although investors of all ages showed at least some willingness to invest new assets with a digital provider, investors under age 30 have a lot more confidence in digital platforms. For example:

  • 48% of investors 70 or older said they invested new assets with a robo-advisor, while approximately three-quarters of those in their 30s or younger did so.
  • A whopping 93% of investors under 30 said they moved assets from another firm to a digital provider.
  • 43% of investors in their 30s moved assets to a robo provider, while the percentage of older investors willing to do so hovered around one quarter, dropping as low as 21% among investors in their 50s.  

In fact, investors in their 50s were most likely to say they neither invested new assets in a digital platform, nor moved assets from a current provider to a robo, Cerulli found.

Even so, Cerulli noted that “Generation X, baby boomers and retirees could eventually enter the customer mainstream, with financial needs that pose greater algorithmic and marketing challenges.”

Millennials

  • 60% of investors under 30 are at least somewhat likely to use a digital advisor.
  • Ease of use is by far the most appealing reason to use a digital provider (52% versus 36% who cited lower costs).
  • Millennials are typically juggling multiple savings goals.

Generation X

  • Average investable assets are $160,000.
  • 60% are comfortable using an online-only service.
  • 32% say they don’t take the time they need to focus on their financial situation.

Boomers

  • Decumulation introduces new complexities to the planning process.
  • Algorithms can help narrow down potential Social Security strategies, while advisors can bring together strategies and clients’ goals.
  • Boomers are comfortable with mobile tools, with more than half using smartphones and 40% using tablets.

“As digital service platforms evolve, their competitive advantage will strengthen if they can expand their appeal beyond young investors with limited assets under management,” Cerulli noted in the report. Even among millennials, lack of trust in automated solutions and a preference for advice from a human are the two most common reasons for not using a digital advice offering.

— Read The Future of Digital Financial Advice: Who Will Succeed? on ThinkAdvisor.