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Technology > Investment Platforms

Older, Wealthier Investors May Be More Into Digital Advice Than You Think

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Which investors are interested in digital advice may not be as clear as advisors think, according to new research from Cerulli Associates.

The firm’s latest research from Cerulli looks at how investors’ interest in using digital advice platforms — which has increased modestly over the past few years — outpaces actual adoption of robo-advice.

Cerulli looked back at research it had done in the fourth quarter of 2015 that examined whether potential investors were open to a purely online relationship.

When Cerulli initially examined this factor in 2015, it found a clear inverse relationship between an investor’s age and their willingness to engage with purely digital platforms. Investors ages 30 to 39 exhibited the greatest enthusiasm, with 61% of them willing to do so, with interest steadily declining to a low of 18% of those ages 70 and older.

Fast forward to now, and Cerulli finds that there is greater openness to digital advice relationships as of the third quarter of 2017. The strongly negative correlation between age and interest still remains, too.

As of the third quarter of 2017, 72% of respondents ages 30 to 39 are interested in such relationships, dropping to 21% of those ages 70 and older.

Cerulli then examined investors’ inclination to use these digital advice platforms from a wealth perspective.

What it finds is that investors with more than $2 million of investable assets express substantial increases in their willingness to engage with digital providers.

According to Cerulli, 38% of respondents in the $2 million to $5 million were willing to go all-in on digital in 2015 versus 46% in 2017; while the share of those with more than $5 million willing to do so rose from 30% to 38%.

Alternatively, interest in lower wealth tiers was more muted. According to Cerulli, the share of interested investors in the $1 million to $2 million cohort dropped slightly from 35% to 33%.

“Cerulli has seen that higher-net-worth investors are more aggressive in adding to their total number of advisory relationships, including digital, as a form of provider diversification,” Scott Smith, director at Cerulli, said in a statement.

When assessing the overall opportunities available to digital advice platforms to appeal to investors, it becomes clear that the most numerous are among the youngest investors. However, Cerulli reveals that there are opportunities — fewer but potentially more profitable — among other segments when you combine age and wealth cohorts.

For example, the 70-and-older segment may be least welcoming of digital advice, but more than one-quarter of this age tier with $2 million to $5 million would consider the option.

“This tells us that instead of solely considering the emerging investor market, providers should consider incorporating digital platform features that address the concerns of those approaching, or in, retirement,” Smith said in a statement.

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