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Younger Investors Want to Increase Advisor Use, Automate Investing: Cerulli

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Investors are keen to expand their advice relationships and their use of a variety of product solutions, according to a new report from Cerulli Associates. This is especially true of those younger than 50.

Related: Nearly Half of Americans Want to Learn More About Investing: Survey

Cerulli and Phoenix Marketing International conducted surveys with investors in the second quarter when the pandemic was surging to find out their future appetite for various financial products and services.

The surveys found that 22% of respondents expected to increase their reliance on an advisor, but projected increases varied widely, from a high of 40% among investors in their 40s to just 9% among those in their 70s.

A similar pattern emerged regarding expectations for use of automated online investment services and budgeting apps. In both instances, investors under 40 showed heightened interest that grew among those in their 40s, then rapidly fell off among older investors.

“These results underscore the importance of establishing advice relationships with investors in their 40s, in many cases before substantial wealth accumulation,” Scott Smith, Cerulli’s director of advice relationships, said in a statement.

“Prospective clients in this segment are desperate for help in sorting out their competing financial priorities but draw little interest from traditional advisors unless they accumulate substantial assets.”

Smith said many firms try to fill this void with digital tools, but noted that although these serve ably on investment portfolios, they lack the emotional connection and customized advice investors look for on the other financial quandaries they face.

Within the banking segment, the report said, the pandemic lockdown prompted millions of consumers to take their first steps into digital banking, only to find that mobile check deposit was a huge upgrade compared with visiting a branch or ATM.

“While online-only challenger banks have been making a stir in this segment for a decade, it seems possible that the intersection of COVID-19 and traditional wealth management providers’ interest in adding cash management to their core services could restructure the segment relatively quickly,” Smith said.

Among transactional payment options, 40% of respondents expressed the highest interest levels in contact-free credit cards, with at least 35% of respondents in each age group under 70 sharing this view.

Cash rewards credit cards garnered the next-highest level of interest at 29%, mainly among respondents under 50.

Smith said adding partnerships with credit and payment providers as a way to become investors’ sole source of financial products was a logical step for traditional wealth management providers to create additional value.

According to Cerulli, the survey results offer a range of opportunities for wealth management providers. Their biggest challenges are remaining top-of-mind among investors in times of need and ensuring that they have a true path of least resistance to bringing clients on board.

“By rounding out their product and service offerings, either internally or through partnerships, providers can better serve their clients and limit attrition by clients seeking more comprehensive platforms,” Smith said.

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