Maru/Matchbox MoneyScreen Study on “Robo-Advisors” Finds Technology Alone Not Enough to Win Over Young(er) Investors
Hybrid “tech/human” model has greatest appeal at present, though that is changing; millennial interest focused on “personal finance” and “investment made easy”
NEW YORK, NEW YORK – (May 30, 2017) – A MoneyScreen study on the use of “robo-advisors” in the investment industry finds that technology alone is not enough to attract and keep current and emerging young investors.
The whitepaper, Robo-Advisors vs. Human Wealth Managers: Young(er) Investors Hold the Answer, is the culmination of two years’ worth of MoneyScreen studies and research led by market insights firm Maru/Matchbox. The study includes the evaluation of 10 widely used online personal financial management platforms to determine user preferences and trends in technology adoption. It divided financial management into four distinct categories: 1) automated investment services, or robo-advisors; 2) traditional financial advice via digital delivery; 3) investment and wealth management platforms for beginners; and, 4) personal finance and budget management.
The study found that 48% of millennials are interested in personal finance platforms for beginners, platforms that offer money management, budgeting or introduction to investments. Half of these younger consumers are currently not interested in the more sophisticate robo-advice models. The lack of interest in sophisticated robo-advice platforms is driven by a lack of comfort and education, with 77% of 18-34 year olds agreeing with the statement, “I want to learn more about investing my money, but it is too complicated.”
Across all consumer segments, platforms for novice investors that made the process easier and offered some level of financial education were most likely to find success, according to the research. There was optimism that technology could help, with 93% agreeing with the statement that, “I think technology can make money management easier.” Those surveyed identified Acorns as the number one platform for middle-aged investors (35+). Goldbean, a start-up that focuses on generating a personalized investment portfolio based on an individual’s credit card spend, ranked number one among younger consumers (18-34).
Robo-only model will struggle
“After a period of explosive growth, the robo-advisor market is starting to slow, and the business model as it was originally conceived is under pressure,” said Demitry Estrin, Managing Director, Financial Services & Healthcare at Maru/Matchbox. “The industry is evolving rapidly, and understanding how technology should be used to present an attractive offering will be critical to its success over the next few years.”
The whitepaper noted that the “pure robo-only model” is in dire straits, while the hybrid robo/human model is building momentum, with this offering more than doubling investors’ interest and willingness to onboard with a company. This relationship was even more profound among investors with more than $200,000 in investable assets.
Much of this is expected to change over the next 10 years as the wealth of the tech-savvy millennial generation grows, according to Maru/Matchbox. Demitry noted that there’s a $30 trillion wealth transfer taking place over the next several decades.
“The result will be a major change in the psychological profile of the typical investor,” Demitry said. “They will be more comfortable with technology, with an expectation of a rapid and constantly improving user interaction. As a result, the status quo or even the current transition to hybrid models will not stand the test of time unless the industry figures out a way of engaging younger consumers earlier.
Developing a buy or build strategy that offers a low cost, education gateway into the world of investment is one of the crucial steps the industry can’t afford to ignore.”
Maru/Matchbox, a Maru Group company, has been pushing the boundaries of the customer market insights space for over a decade. We are a sector-focused consumer intelligence firm focused entirely on better client outcomes. Our expert teams are deeply invested in key sectors of the economy, delivering insights and analysis backed by superior quality data.
About Maru Group
Maru Group is a technology enabled professional services firm delivering information and insight services. Operating in multiple countries, MARU Group provides research, insight and advisory services to large enterprises across a broad spectrum of industries and markets. Founded in 2016, Maru Group’s core area of expertise is providing fast and strategic customer feedback to corporates through a variety of technology platforms. Led by market intelligence industry veteran Ged Parton, Maru Group is backed by Primary Capital Partners LLP, a United Kingdom-based provider of private equity finance for high potential and growth companies.