Look out humans, its the rise of the robo-advisor.
The number of people using robo advice in the U.S. is expected to grow significantly over the next few years, according to a new study commissioned by Charles Schwab. In the study, The Rise of Robo: Americans Perspectives and Predictions on the use of Digital Advice, the retail brokerage discovered that 58% of Americans will be using a robo-advisor to assist in their investment decisions by 2025. And people are more likely to use robo advice than a number of other technologies in the headlines today including artificial intelligence, virtual reality, blockchain and cryptocurrency.
Also cited in the Schwab report was a tidbit from market consultancy Aite Group, which stated digital advice users will increase from roughly 2 million to 17 million by 2021.
The report examines Americans outlook on robo advice – its potential impact on how they invest and the financial services industry overall, the perceived benefits, and what factors make them more likely to consider an automated investing service. The report also digs into current robo advice users across the U.S. – who they are, where they are, and what they think about the services theyre using to reach their investing goals.
Despite the benefits of automation with a robo advisor, the report also made clear that Americans still see value in the ability to interact with a person when needed. Seventy-one percent of people want a robo advisor that also has access to human advice and nearly half (45%) not using a robo advisor today would be more likely to use one if it has quick and easy access to human support. Even among millennials, 79% want a robo advisor that also provides access to human advice.
Beyond investing, 42% of baby boomers are more comfortable relying on technology than people to answer questions and solve problems, and boomers also report that technology has helped them improve their financial lives: 51% say technology gives them more confidence of mind when it comes to finances and 44% say technology has helped them reach financial goals. Although robo advice is often thought of as a tool primarily for younger investors, older generations see the appeal as well. In fact, nearly half of baby boomers using a robo advisor today say the service is perfect for their life stage. Among all boomers, 62% agree that robo advice takes the emotion out of investing, nearly half (49%) say it helps them maintain a diversified portfolio, and 46 percent trust robo advisors to provide more transparent financial advice.
Looking at millennials, the report found that the majority are users of robo advice and nearly a quarter are gen-x. Nearly 30 percent of todays robo advice users have an income over $100,000, and users are spread out geographically across the country with the highest penetration in the south. Not surprisingly, robo advice users are more tech savvy than the average American. Thirty-one percent say they are firstadopters of technology compared to just seven percent of Americans overall. In addition, more than 80 percent reveal that technology has given them the ability to spend more time with family instead of finances, has given them more peace of mind when it comes to their finances, and has put them in a better position to reach their financial goals.
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The report was based on an online study conducted by independent research firm Edelman Intelligence among 1,000 U.S. general population adults and 391 robo advisor users over the age of 18 between July 25, 2018 and July 31, 2018. General population respondents were weighted to be nationally representative based on most-recent U.S. Census data. Robo advisor users were collected based on mix of natural fallout among general population and oversample; users were identified through self-selection of at least one robo advisory platform. The study has a margin of error of 3.1% at a 95% level of confidence
