E*TRADE (ETFC) recently released results from their most recent StreetWise quarterly tracking study of experienced investors. In this specific study, they were looking at investors preferences when it comes to robo-advisors. This is an area that StockBrokers.com has been following closely, and we’ll continue to keep you updated on this fast-growing area in the sector. What were investors looking for based on this study?
In the study, investors were given three choices:
A. Low cost digital-only solution, managed and rebalanced by an algorithm.
B. Moderately priced digital hybrid solution, defined by both automatic rebalancing and human guidance
C. Higher cost advisor-driven account managed solely by a professional
Overall, 50% of people in this study chose B, the digital hybrid solution. The preference toward the hybrid model robo-advisor was most pronounced among younger investors, but all age groups listed this as their top option.
Kunal Vaed, SVP of Digital Channels at E*TRADE Financial, gave some interesting thoughts on the results of this study. Vaed said, “The data suggests a new paradigm in robo-advisory models: adaptive solutions backed by human support.” He continued by saying, “The idea that younger investors will only gravitate towards the cheapest solution is a myth.”
Vaed had three key takeaways from these results-
1. Machines are Not Taking Over the World- Human guidance and support still matter despite the increase in software solutions
2. Value Matters- Cost matters, but it isn’t the only factor
3. Active vs. Passive Management is not either/or- Both passive and active management options are popular with investors.
For the full press release on this study click here.