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Young investors prefer humans for financial advice

Young Investors Prefer Humans for Financial Advice

Millennials have grown up, and according to 2021 survey findings by the Natixis Investment Managers, they are the focused, financially disciplined, and responsible adults in the room. The oldest members of the generation are now in their 40s and entering their peak earning years. They’ve witnessed historical events like the Great Recession, 9/11, the tech revolution, and the Coronavirus pandemic. They know what loss looks like and want to protect their investments as they see risks rise and their finances grow more complex.

Contrary to the misconception that Millennials are poorly prepared idealists with trust issues and entitled beneficiaries of their parents’ wealth, they’re diligent savers, setting aside an average of 19 percent of their income for retirement.

Retirement Feels Much Closer at 40

On average, Millennials hope to retire by the age of 50. It’s an ambitious goal, and they are aware of the risks, which explains their emphasis on financial planning and advice.

Robo-Advisors Have Arrived

Technology is known to disrupt many industries, and the financial planning industry is no exception. After years of development, robo-advisors have entered the world of investment management and retirement planning, with automated investing advisors quickly growing assets under management (AUM).

You may be familiar with names such as Ellevest and Betterment. The two digital platforms utilize advanced algorithms to select and manage investments. Portfolios typically comprise mutual funds and ETFs to help keep costs relatively low. The available strategies, recommended allocations, and other features vary from one service to another.

The concept behind robo-advisors is pretty straightforward: an investor fills out a standard online questionnaire to help determine their investment objectives and risk tolerance. The software then creates a portfolio with a mix of assets that align with the investor’s stated short-, mid-, and long-term financial goals, such as a child’s college expenses, saving for a home purchase, or retirement.

A robo-advisor can be programmed to automatically place trades, rebalance portfolios, generate reports, and perform other asset management tasks.

Algorithms Can’t Answer All Financial Questions

For tech-savvy young investors eager to grow their retirement accounts, robo-advisors seem like a match made in heaven, right?


While this technology may appeal to the young generation who uses electronic devices to do everything, the real test is in times of extreme market volatility or economic downturn.

Take the past year, for instance. Many digital retirement savers abandoned their investment strategies because they lacked a familiar voice to guide them through the storm. This exposed the shortcomings of robo-advisors that were supposed to democratize investing.

A recent J.D. Power Retirement Plan Digital Experience Study revealed that dissatisfaction with digital retirement platforms has increased as the market has fallen.

Many investors are not finding what they need and end up having to call customer service for help.

Millennials Prefer Traditional Financial Advisors to Robo-Advisors

Millennials, who describe themselves as “curious” investors, enjoy learning about investing and are open to unique investments or approaches. They want to take a hands-on approach to managing their investments.

Millennials are rediscovering old-school financial advisor relationships and human interactions. They recognize that financial advisors can provide personalized, face-to-face guidance as they accumulate wealth and their goals become more complex.

The majority work with a traditional financial advisor either solely (40 percent) or in combination with automated advice such as a robo-advisor (26 percent). Only 7 percent solely rely on automated advice.

While many prefer to receive financial advice through online or digital channels, Millennials want to know there is a real person is on the other end. They’re willing to pay the more expensive investment fees associated with traditional advisors.

This is especially interesting, considering the burden of hiring a human advisor is tenfold that of downloading a robo-advisor of their choice for free on the App Store.

They cite the 3 most important facets of the advisor-client relationship as (a) helping manage volatility, (b) discussing financial planning with family, and (c) having someone who listens.

Their top 3 financial fears now are tax increases, market volatility, and slow economic recovery.

Why A Human Touch in Financial Planning is Necessary

Planning a financial future is a very personal experience that relies on more than just allocating funds across various asset classes. While a robo-advisor can easily manage a portfolio in a strong market, during a period of extended volatility or recession, many investors find comfort in being able to pick up the phone and talk to a human advisor to make sense of the current situation and formulate a plan for the future.

There are still a few critical things that human financial advisors can do better than robo-advisors:

Understand Client’s Needs

The true value of a financial advisor lies in interaction. When human advisors form personal relationships with their clients, they gain insight into their unique financial picture, including their pressing concerns, psychological tendencies, and priorities. Human advisors are also well-versed in the core financial needs that most people likely have. When a challenge arises, a financial advisor can help the client overcome biases and impulses that could hinder them from attaining their objectives.

Offer Additional Choices and Comprehensive Service

While robo-advisors can manage investment assets for a fraction of the price, their services are typically limited to portfolio management. Also, their reliance on stocks, mutual funds, and ETFs means that younger investors may not have access to some types of alternative investments and strategies.

Human advisors typically have a wider range of asset classes to choose from and may be able to build broader investment portfolios — or more focused ones — depending on the client’s goals and risk profiles.

Offer Accountability and Perspective

While it may be easy to ignore a robo-advisor’s recommendation when an investor loses track and isn’t making adequate progress toward their stated financial goals, it might be harder to disregard a trusted human advisor.

Regular checkups with a real person who cares about their client’s future might inspire more realistic decisions about retirement planning. A financial advisor will listen and lend emotional support through transitions in life, some of which may call for a shift in financial strategies.

Robo-advisors are undoubtedly one of the exciting advancements in the FinTech sector in recent times. However, with an increasing number of millennials considering themselves investors and a healthy portion expressing interest in personalized financial advice, it is essential for financial services leaders, especially those in the investment space, to tailor their advice to meet the unique demands of this generation.

While there is no certainty that working with an investment counselor or financial advisor will improve investment results, as all investing involves risk, a human advisor offers all forms of counsel, from basic banking to estate planning, and will be with you every step of the way.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances.

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