By John Drachman
After a year of sheltering-in-place from a safe social distance, many investors and advisors found themselves on new common ground where digital advice tools have become part of their professional advice relationship.
During the pandemic, it was no surprise that digital interactions were essential in substituting for in-person meetings. Evidence showed that such communications-at-a-distance offered wealth managers a digital means for successfully distinguishing investor preferences by gender, age group and assets under management (AUM) as well.
When a Broadridge Financial Services survey Personalizing Advice for a Digital Distance, asked investors, “Where are you most likely to seek out financial information?,” the majority of investors said they turned first to financial websites of their advisors or institutions, followed by a split between friends and family members.
Having surpassed the baby boom generation in size and power, the 83 million millennials born between 1977 and 1995 are now on top. Meanwhile, the oldest members of Gen Z – the first Internet-savvy cohort – just turned 26 this year. While comfortable with all things digital, including portfolio management, many younger investors are finding limits to what popular robo-advice platforms like Robinhood can deliver.
While an overwhelming majority of Gen Z and millennials said they were comfortable with advisors tracking their preferences on social media to offer them a more personalized experience, fewer Gen X or baby boomers liked the idea. Meanwhile, in a response to growing wariness about the market’s volatility, one in four Americans sought out an advisor for the first time ever in 2020.
Across the generations, there’s general agreement around four ways the human professional comes out on top:
- Alternative investing requires deeper understanding: While digital platforms and robo-advisors may offer ease, convenience, cost-efficiency and a lot of products, they do not offer a lot of asset classes. Alternatives from precious metals and real estate to managed futures and hedge funds are generally off the table for most digital platforms.
- Estate planning takes a personal touch: Longevity and extended families complicate the advice picture, too. An algorithm cannot take a client out to lunch or consult on the end-of-life scenario for a loved.
- Life’s unpredictability can be tempered by an experienced hand: Career changes, marriage and divorce, the addition of children, family members with special needs, severe illnesses and accidents, retirement, long-term care – even moving one’s residence must be factored into a coherent vision that lies outside the scope of digital-only solutions.
- Building lasting legacies takes expert advice: Robo-advisors are speechless when it comes to advising on strategies for leaving a bequest to a client’s community, college or religious institution. Financial advisors, on the other hand, can quickly reflect an individual’s specific wishes, while shielding an estate from unnecessary costs. Only a traditional advisor can counsel a client on the desirability and differences among such vehicles as charitable trusts, donor-advised funds or gift annuities, for example, in reaching a clearly defined set of philanthropic goals.
Flesh and blood advisors can also expand beyond a single client relationship to overlooked client heirs—children, grandchildren and spouses – when their advice needs must be met too.
John Drachman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.