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The Challenge That Self-Directed Investors Pose to Advisors

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What You Need to Know

  • A recent Broadridge survey of investors found that 52% use self-directed brokerage accounts.
  • About half of those investors use self-directed accounts exclusively; slightly more than half also engage an advisor.
  • Advisors need to demonstrate their value to investors with client-centric tools,

A recently released Broadridge survey of 1,000 investors with $10,000 or more in investable assets found that 52% use self-directed brokerage accounts and about one-third of them expect to increase their trading frequency over the next 12 months.

Of those investors who have self-directed brokerage accounts, half use those accounts exclusively and slightly more than half also work with a financial advisor. About one-third of the 1,000 investors surveyed work exclusively with an advisor, and almost all investors (96%) who work with an advisor were satisfied with the relationship.

Among those investors who don’t currently use a financial advisor, 44% said they were likely to start working with one over the next two years to reduce financial stress. A little more than half of millennial investors said they were likely to employ an advisor because of concerns that they’re not on track to meet their financial goals.

“Everyday investors are demanding a say in when and how they invest and are increasing their focus on financial planning, especially in the wake of unprecedented market volatility,” said Andrew Guillette, vice president of distribution insights, Americas, at Broadridge, in a statement. “Financial advisors now sit at a critical juncture where they need to directly demonstrate their value by providing client-centric tools, products and advice.”

The survey found that across generations investors prefer online or mobile apps for buying and selling assets and reviewing their financial accounts and for daily banking purposes and access to financial education.

Millennials were among the biggest users of self-directed accounts, with 65% using them, but the percentage of high-net-worth investors using those accounts were almost as high (64%).

High-net-worth investors, defined as having more than $1 million in investable assets outside work retirement accounts, accounted for only 12% of the survey’s respondents, however. Mass affluent investors, with $100,000 to $999,000 in investable assets, accounted for 55% of survey respondents and mass market investors (under $100,000 in investable assets), one-third.

Self-Directed vs. Robo-Advisor Accounts

The survey also found that self-directed brokerage accounts were more popular than robo-advisors, which choose investments for clients based on their risk profiles and goals. Only 6% of respondents reported using robo-advisors, but 33% said they were familiar with the concept.

About three-quarters of millennials familiar with robos but not using one said they were likely to engage a robo-advisor in the next 12 months. The survey was conducted in April and May 2021.