An MDRT study examines what consumers think of technology in financial services, clients’ perspectives on robo advisors, and the technology they expect their advisors to incorporate.
Whether they use a financial advisor or not, about the same percentage of Americans in each group agree it is important for advisors to be both technologically savvy (95 percent each) and use updated technology-based tools in their practices (96 percent who have an advisor and 95 percent who don’t have an advisor).
The majority of Americans (88 percent) say technology should complement, not replace, the services of a human financial advisor, with 85 percent stating they prefer working with a human financial advisor than a robo advisor.
Only five percent of Americans believe financial planning should be managed entirely by technology-based tools, and 36 percent strongly disagree that robo advisors could completely replace the role of human financial advisors in financial planning.
The study found that while 83 percent would trust a human financial advisor to effectively manage their financial plan, only 36 percent would trust that job to a robo advisor.
The human advantage
The top benefit Americans cite for preferring to work with a human financial advisor is the opportunity to build a trusting relationship (65 percent), followed closely by the high level of human interaction (58 percent) and ease of communication (52 percent).
The main concerns of working with a human financial advisor are cost (47 percent), response time (32 percent) and accuracy of assessments (31 percent).
The top benefit of working with a robo advisor over a human advisor, according to Americans, is minimized risk of human error (49 percent). The main concerns are lack of two-way conversational communication (58 percent), minimal human interaction (48 percent) and breach of data, including personal (46 percent) and financial (44 percent).
Ninety-four percent of Americans who currently work with an advisor say it’s important that advisors use software to model financial outcomes; 80 percent believe cloud storage is a necessity for advisors to use to manage their business while 72 percent want an internet platform for scheduling appointments.
However, only 48 percent of Americans with a human financial advisor state that their advisor uses a software to model financial outcomes, 32 percent say their advisor uses an internet platform for appointment scheduling and only 28 percent indicate their advisor uses cloud technology.
About a third of Americans (31 percent) have concerns that human advisors might not be accurate in their financial predictions and nearly half (49 percent) list minimized risk of human error as a benefit of working with a robo advisor versus a human advisor.
Advisors who use software to model financial outcomes can mitigate this concern. Thirty-two percent of Americans list not receiving a quick response as a concern of working with human financial advisors. Advisors who implement an internet platform for scheduling appointments can sate this worry while also providing their clients with ease of communication.
A new opportunity for advisors
When it comes to hiring a financial professional or using technology, millennials (age 18-34) are split. About half (52 percent) would trust a robo advisor to effectively manage their financial plans, while the remaining 48 percent would not. Millennials are also twice as likely as some of their older counterparts (ages 45+) to agree that robo advisors could completely replace the role of human advisors in financial planning (38 percent vs. 17 percent).
“Understanding what millennials value allows us to grow and streamline our services to appeal to the next generation of clients,” said Russ Vanderwolf, CFP, MDRT President. “Advisors who can cater to millennials’ technology-based needs while also highlighting the benefits of working with a human advisor will have a winning edge.”
The survey was conducted online by The Harris Poll on behalf of MDRT from November 1-5, 2018, among 2,008 U.S. adults ages 18 and older, among whom 771 currently work with a human financial advisor.