A new survey from NerdWallet finds that most individual investors prefer human investment advice versus communicating with an algorithm.
When both human and robo-advice are available, 84% of survey respondents would rather work with a human financial advisor to invest their money compared with 16% who would prefer to use a robo-advisor, according to NerdWallet.
The survey found that 44% of investors use a human financial advisor to manage their investment accounts, while 15% say they use a robo-advisor to manage them.
The survey also found that confusion about exactly how robo-advice works is common. A full 64% of survey respondents stated they don’t fully understand all the advantages and disadvantages of working with a robo-advisor versus a human financial advisor.
Individual investors want to talk to another human about their money and investing. Even the 51% of the survey respondents who do not use robo-advice stated they don’t because they want to talk to a human being.
Here is the confirmation of the preference of human conversation about finances. A full 66% of the individual investors in the survey who use a human financial advisor to manage their investments say they do so because they want to be able to discuss their investments with an actual person.
This survey included individual company 401(k) retirement plan investors. Over 39% of the survey respondents have 401(k) accounts and 33% have IRA’s. The average account balance of those surveyed is $368,619.
The larger the household annual income, the more popular human investment advice becomes. About 51% of annual household income of $100,000 or more use a human advisor to manage their investments.
It turns out that affordability is an important factor in human investment advice. Nearly two-thirds (65%) of individual investors those who don’t use a human advisor to manage their investments say they would hire one to manage them if they could afford it.
Robo-advice can only be done over the telephone or video conference. That is once of the main reasons for the low-cost and mass appeal of the product.
The survey respondents were very clear about the importance of human investment advice. The majority (74%) think using a human financial advisor would be the best way to get the highest return on an investment.
Here is the survey finding I found most interesting. Only 34% of the individual investors in this survey who use robo-advisors feel very confident about their investment growth.
Human investment advice is not that much more expensive than robo-advice from an individual company 401(k) retirement plan account. Why spend the money on robo-advice and not feel confident about your investments?
The survey was conducted online by The Harris Poll on behalf of NerdWallet from Jan. 22-24, 2020, among 2,016 U.S. adults, including 1,213 who have investment accounts.
Ric Lager
Lager & Company, Inc.
