E*TRADE Financial Corporation (ETFC) today announced results from the most recent wave of StreetWise, E*TRADE’s quarterly tracking study of experienced investors.
Results indicate that, when choosing between three managed accounts, investors are more likely to select a solution that combines digital guidance with human support.
When asked to choose between three account types — a low cost, digital-only solution, managed and rebalanced solely by an algorithm; a moderately priced, digital hybrid solution, defined by automatic rebalancing and human guidance; or a higher cost, advisor-driven account, managed solely by a professional — investors are more likely to choose the digital hybrid model. This preference is more pronounced among Millennial and Gen X investors.
“The data suggest a new paradigm in robo-advisory models: adaptive solutions backed by human support,” said Kunal Vaed, SVP of Digital Channels at E*TRADE Financial. “The idea that younger investors will only gravitate towards the cheapest solution is a myth. While intuitive and insightful digital tools are a necessity in catering to today’s investors, at the same time, investors seek human guidance. Investors want to be able to talk to a professional, especially during extreme market volatility.”
Mr. Vaed shed additional light on robo-solutions and investing trends today:
Machines are not taking over the world. Despite the rise in software, the data suggest human guidance and support still have an important place in the minds of investors.
Value matters. Much has been said about how attractive low or no-fee platforms have become, particularly for younger investors. Yet results show that Millennials and Gen X are not entirely driven by cost. Many investors today are willing to pay more for a robo-solution that includes some human support.
Active vs. passive management is not either/or. While passive products like ETFs and index funds remain popular, actively managed products continue to serve a role in many investors’ portfolios.