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No, Your Client Won't Ditch You for a Robot: Vanguard Survey

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What You Need to Know

  • Study participants believe advice provides higher incremental portfolio value than going it alone, regardless of delivery method.
  • Human agents excel on portfolio, financial and emotional outcomes.
  • Respondents say human advisors should consider automation for portfolio construction and functional tasks, such as account setup and consistent monitoring.

Are technology and digital advice a threat to human financial advisors?

To find out, Vanguard researchers Paulo Costa and Jane Henshaw in July surveyed 1,518 U.S. investors with at least $100,000 in investable assets who reported having a human advisor, using a digital service or both. 

They also conducted qualitative interviews with 25 investors and 15 advisors to understand how and why investors choose human versus digital advice services and the tasks that define each service model.

The research showed that study participants believe advice provides higher incremental portfolio value than going it alone, regardless of delivery method, but digital services do not threaten an advisor’s book of business. 

Ninety-three percent of human-advised clients said they would use a human advisor in the future, whereas 88% of robo-advised clients said they would consider switching to a human.

Costa and Henshaw quantified the value that investors perceive in human and digital advice services across a three-pillar framework of portfolio, financial and emotional outcomes. They found that human agents excel in all dimensions.

Investors’ perceived value-add to annual performance was 5% for human advice and 3% for digital-only advice. Human advisors also provided three times the emotional support, compared with self-management of investments.

Both human- and digital-advised clients believe that their advisors add substantial financial value in helping them achieve their financial goals. To convert perceived financial value to dollar terms, the researchers used $1 million as the median financial goal of both human-advised and digital-advised clients. 

They found that human-advised clients perceived themselves as $160,000 closer to achieving their financial goals thanks to their financial advisors, versus $50,000 closer for digital-advised clients.

Digital advice holds its own in one regard. The study found that across all generations, wealth levels and advice-delivery types, clients think that human financial advisors should consider automation to outsource portfolio construction and functional tasks, such as account setup and consistent monitoring. 

This is good news for advisors, according to the researchers, because it will allow them to scale technology to their entire client base. They can then focus on delivering uniquely human skills that help clients achieve financial success and provide peace of mind. 

Costa and Henshaw said human advisors should leverage both automation and upskilling about emotional needs of clients to optimize their value, scale their practice and target the unmet needs of investors who are robo-advised and who would be willing to switch their business in the future.