Cogent Reports: Use Of and Interest In Robo-Advisors Soars Among Investors

Early Adoption driven by Millennials, But Gen X Wants In on the Action

CAMBRIDGE, Mass.–(BUSINESS WIRE)–Nearly one-third (30%) of affluent Americans are already using some type
of automated investment advice service—also known as a robo-advisor—to
manage a portion of their assets, and an additional 22% are thinking
about placing money with a robo-advisor in the near future. However,
despite increasing comfort with using these products, investors seem
uncertain about where to turn for a solution.

Among those expressing interest, only half (51%) can name a would-be
provider, leaving the other half (49%), about 10% of all affluent
Americans, open to learning about automated investment advice solutions
from well-known players and upstarts alike. These and other findings are
included in the 2015
Investor Brandscape™
report released last week by Cogent
Reports™
, the syndicated research division of Market Strategies
International.

Cogent Reports found that 17% of investors are using robo-advisor
services from an established provider—namely, Fidelity, Vanguard, and
Charles Schwab—while 10% are using one of nearly two dozen emerging
providers, and an additional seven percent are unable to name their
provider.

The research reveals that three-quarters (76%) of robo-advisor users
have less than $500,000 in total investable assets; however, money
invested with a robo-advisor typically represents a majority of users’
assets—60% on average. While Millennials (26%) and Gen Xers (31%) make
up the majority of current robo-advisor users, four in ten users are
either 1st Wave (18%) or 2nd Wave (19%) Boomers.

“To say that robo-advisors
have gained traction in the marketplace
would be a dramatic
understatement at this point, particularly where younger investors are
concerned,” said Linda York, vice president at Market Strategies.
“Furthermore, with adoption anticipated to increase rapidly, industry
leaders are scrambling to figure out how to get into the game. Since
sitting on the sidelines is not an option, many companies are
considering whether to build it or buy it.”

According to Cogent Reports, the vast majority of near-term adoption of
robo-advisors will come not from Millennials, but Gen Xers, the oldest
of whom are turning 50 this year. Not only is this the generation most
interested in robo-advisors, it is also the group most likely to name an
emerging provider for consideration.

“Our research shows the factors that most distinguish those likely to
embrace robo-advisors from those who will not are a much higher level of
concern about the ability to save for and adequately fund retirement,
and a strong desire for enhanced investment performance,” continued
York. “These priorities coupled with a notably higher risk-profile
suggest that many pre-retirees see automated investment service
solutions as a good way of getting to their retirement goals. Needless
to say, this could have huge implications for the IRA rollover
marketplace as well as threaten the dominance of traditional target-date
funds inside of DC plans.”

The Top 10 Providers Generation X Investors Are Likely to Consider

  1. Fidelity Investments
  2. Vanguard
  3. Charles Schwab
  4. Motley Fool Wealth Management
  5. Betterment
  6. Wealthfront
  7. AssetBuilder
  8. Hedgeable
  9. Personal Capital
  10. FutureAdvisor

Source: Market Strategies International. Cogent Reports™. Investor
Brandscape: October 2015.

About Investor Brandscape

Cogent Reports interviewed 3,889 affluent investors who were recruited
from the Research Now, SSI and Usamp online panels. Respondents were
required to have at least $100,000 in investable assets (excluding real
estate). Due to their opt-in nature, the online panels (like most
others) do not yield a random probability sample of the target
population. Thus, target quotas and weighting are set around key
demographic variables using the most recent data available from the
Survey of Consumer Finances (SCF) conducted by the Federal Reserve
Board. As such, it is not possible to compute a margin of error or to
statistically quantify the accuracy of projections. Market Strategies
will supply the exact wording of any survey question upon request.

About Market Strategies International

Market
Strategies International
is a market research consultancy with deep
expertise in consumer/retail, energy, financial services, healthcare,
technology and telecommunications. The firm is ISO 20252 certified,
reflecting its commitment to providing intelligent research, designed to
the highest levels of accuracy, with meaningful results that help
companies make confident business decisions.

Market Strategies conducts qualitative and quantitative research in 75
countries, and its specialties include brand, communications, CX,
product development, segmentation and syndicated. Its syndicated
products, known as Cogent Reports, help clients understand the market
environment, explore industry trends and monitor their brand and
products within the competitive landscape. Founded in 1989, Market
Strategies is one of the largest market research firms in the world,
with offices in the US, Canada and China. Read Market Strategies’ blog
at FreshMR,
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Contacts

Market Strategies International
Anne Fallon, 617.715.7611
anne.fallon@marketstrategies.com