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CREALOGIX Study: Millennials Three Times More Likely to Accept Automated Investment Services Than Baby Boomers

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New study of consumer preferences finds that robo-advisory and automated investment management services find a receptive user base among younger and more inexperienced investors.

An independent study of 1,200 UK consumers commissioned by CREALOGIX, the provider of digital banking solutions, has revealed that younger generational groups, in particular millennials, are significantly more open to receiving automated financial advice and investment management than their elder counterparts.

Over 60 per cent of millennials aged between 30 and 37 stated that they would be receptive to an automated financial service, rising to almost 70 per cent of those aged between 22 and 29.

A robo-advisory service is based on predefined business logic that learns and responds to investors’ circumstances, preferences, and goals. Questions and recommendations are delivered interactively through a website or mobile app, so a service does not require intervention by a human advisor for an investor to create or edit their investment profile and orders.

The survey found that as age increases, consumers are increasingly likely to express resistance to a service described as based on software rather than human interaction. The Generation X demographic, while more open to the idea of robo-advisory services than baby boomers, are still relatively resistant with only 40 per cent in favour between ages 46 and 52. This figure rises to 50 per cent among the younger Generation X of 38 to 45 year olds. By comparison, 68 per cent of younger millennials between 22 and 29 were receptive to automated investment management.

Interestingly, the different age brackets were much more in agreement in their perceived value of face-to-face time with human advisors, with 40 per cent of respondents considering it as the most important feature of using a professional wealth manager. This represents an opportunity for wealth managers to combine their digital offering, which appeals to younger people, with a more traditionally valued face-to-face service, while underscoring the risks of interpreting “digital first” as “digital only”.

Jo Howes, Commercial Director at CREALOGIX UK said: “Is there resistance to robo-advisory wealth management? We don’t believe there is, especially when you look at the younger target customers. If anything, the resistance has come from institutional misunderstanding of the potential offered by this technology and how it can sit together with human expertise. There is a growing interest in digital-first financial services, particularly among tech-savvy young people, and most of the new brands rely in some way on robo-advisory approaches. This shift is prompting many to review their direct-to-consumer strategy.”

Automation of advisory wealth management services lowers the cost of delivering and receiving high quality managed investment products, along with allowing for lower account minimum deposits and more transparent customer data management. This improves overall access to wealth management services, regardless of investor’s income or net worth. While just 23 per cent of baby boomers are open to receiving this type of service, millennials are three times more likely to accept robo-advisory investment services. This figure reflects the potential value of this technology to a traditional industry seeking to lower their average customer age.

For some, scepticism about digital services and automation persists due to the high value placed on human interaction as offered by traditional financial services. However, the combination of reduced costs, improved access and more consistent, up-to-date advice is driving consumer demand. This is just one facet of a much wider shift in consumer attitudes towards financial services and wealth management in particular.

“As demand for interactive, self-service investment services grows, wealth management firms are recognising that they can exploit this technology to gain relevance in the eyes of younger clients, as well as remain competitive with their existing customer base,” Howes added. “Robo-advisory services are heralding a positive change in the industry, closing the advice gap and expanding the market for high quality investment products. Firms should be prepared to embrace robo-advisory technologies and capabilities, and with it attract a new wave of tech savvy and financially engaged clients.”

The independent study was undertaken by Censuswide between 26th–29th July 2018. It interviewed 1,200 consumers aged 16 and above.

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