• by Michael Baer , April 10, 2018

“Robo-advisors” — the digital platform that provides automated, data/algorithm-driven financial planning services with little to no human supervision or intervention — launched in 2008. A decade after their consumer debut, they are capable of handling increasingly sophisticated tasks, and the industry expects seismic growth of the segment. 

In January, our Affluent Intelligence group investigated the FinTech attitudes and behaviors of the affluent Americans ($125+k) we study. We re-contacted over 800 respondents of our study to gauge their awareness, usage, intent and interest in a variety of FinTech products and services. We’ve been tracking robo-advisors since 2015, and until recently we had seen little movement in most measures. That changed this year, with data showing a significant opportunity on the horizon.

Although adoption remains low at 5.3%, awareness and interest have reached the high teens and beyond — nearly double the amount found last year. In addition, people who say they intend to use a robo-advisor in the next year is almost 2.5 times the number who currently use one. It seems we may be nearing a tipping point. 

Affluents who’ve engaged robo-advisors cite a wide variety of reasons. Value and ease of use are among the most commonly mentioned benefits. The service’s bias-free, data-driven approach also appeals strongly. Many say robo-advisors help uncover new opportunities. These varied benefits present an opportunity for marketers to develop customized messaging that will appeal to specific audiences, reaching them in the right places and phases of their user journey.

The term “robo-advisor” may be a hindrance to consumer adoption. When asked whether they would prefer to follow recommendations from a human financial advisor or a robo-advisor, only 14% chose the robo-advisor. However, when asked to choose whether they trust human judgment or data algorithms more, 29% of respondents chose data — demonstrating that the benefits of Robo-advisors are more broadly appealing than current usage suggests. Considering that consumers know the “robo-“ prefix from robo-callers, robo-signing and Robocop, it’s not surprising there are some negative connotations to overcome.

Current robo-advisor users are Gen X tech guys who describe themselves as financial risk takers (Index 210) and entrepreneurs. Relatively young (median age 42) and largely male (58%), they make average salaries compared to other affluents ($156K median HHI) and possess a sizable net worth ($856K). 

However, while they consider themselves financial affluent influencers (or “Affluencers”, as we call them), they’re less likely to say, “I am actively involved in the management of my personal finances.” These folks ordinarily would not be breaking new ground in financial services — it’s their comfort with technology that has led them to robo-advisors. Among the most influential groups around when it comes to technology, they index sky-high for providing technology advice (Index: 181) and tech early adoption (Index 190). Not only are they happy to chart new territory, they have the tech expertise to educate and advise new consumers to emerging FinTech products and services. 

And there’s already another group of affluents that’s showing interest. They haven’t used robo-advisors but plan to in the next 12 months. These intenders don’t resemble current users. They’re significantly younger—nearly half are Millennial. They make more money than current users ($172K HHI), but due to their relative youth, have a lower net worth.

Intenders and current users show similar levels of financial involvement, engagement, influence and tech savvy. The biggest difference is their willingness to take on financial risks. While current users are off the charts (Index 210), intenders are far more conservative (Index 129). They tend to wait for those with experience to lead the way.

What unites users and intenders most is their faith in data. Half of both groups say they trust data algorithms more than human judgment (vs. 29% of total affluents). And with only 40% of robo-advisor users saying they prefer advice from human financial advisors, it’s clear users are satisfied by their robo-advisor experiences—or very dissatisfied with human advisors in the past. 

For the moment, the robo-advisor segment is being driven by tech early adopters and enthusiasts. They’re comfortable with data, willing to take financial risks, and interested in working with new and innovative companies. And they’re busily educating and advising the second wave of consumers to enter the segment.