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Personal Finance Reports

Robo Advisors vs. Financial Advisors – Millennials Still Prefer Real-Life

Its 2017, and believe-it-or-not, there is still at least one traditional service that seems like it will not be getting phased out anytime soon by a more accessible, modern-day technological service.

You may be saying, “Hold the phone, how is that even possible? Technology makes everything better.” But according to a new LendEDU poll of millennials, young Americans are still showing a preference towards real-life human financial advisors as opposed to robo-advisors.

As part of a society that ever-increasingly turns to automation, robo-advisors have exploded in popularity in recent years. Business Insider’s research service, Business Intelligence, predicts that robo-advisors will manage 10 percent, or $8 trillion, of all global assets under management (AUM) by 2020.

All things considered, whats not to love about robo-advisors?

Robo-advisor investment fees range from free to one percent, whereas financial advisors charge anywhere from one to three percent. Traditional investment advisors usually only take on clients with a minimum portfolio balance of $200,000. In comparison, while many robo-advisors will have no minimum balance, some may require only $5,000, which is still peanuts compared to what financial advisors require. 

Finally, robo-advisors are available to you around the clock with no stressful scheduling required.

For tech-savvy millennials eager to grow their portfolio and their bank account, robo-advisors seem like a match made in heaven, right? 

Wrong. We found that, when it comes to their hard-earned money, millennials still want a human-being handling it. 

Millennials Are Already Using Traditional Financial Advisors More Than Robo-Advisors

LendEDU asked the following question to 502 millennials that are actively saving for retirement and between the ages of 18 and 34: “Are you currently working with a financial advisor to invest or save for the future?”

The majority of respondents, 53.59 percent, stated that they were not working with a financial advisor. However, 46.41 percent of millennials said that they were working with a financial advisor, which is nearly double the amount of respondents that were using a robo-advisor.

The same pool of respondents were asked the following: “Have you used a robo-advisor (ex. Betterment, Acorns, Wealthfront, etc.) to invest or save for the future?”

This time, only 24.30 percent claimed to have been using one of the many robo-advisors to invest and save for the future. 75.70 percent have never used a robo-advisor, but as you will find later, 61.58 percent of those who have not used a robo-advisor said their reason was that they have never heard of a robo-advisor. This suggests that with a better marketing strategy, robo-advisors could see a huge uptick in users that improves upon the already impressive 24.30 percent of millennials that have used such a service.

It was quite interesting to discover that traditional advisors are nearly two times more prevalent amongst millennials than robo-advisors. This is especially eye-catching when you consider the burden of hiring a real life financial advisor is tenfold that of going to the App Store, scanning your iPhone fingerprint, and downloading the robo-advisor of your choice for free.

One also must consider that millennials are willing to pay the the more expensive investment fees that are associated with traditional advisors. 

Yet through all of this red tape, millennials are still entrusting traditional financial advisors to handle their money, a finding that is reinforced with the next series of poll questions. 

Who Will Handle My Money Best? Millennials Say Human Beings Across-the-Board

We asked three questions to our millennial respondents pertaining to who would do a better job handling their money: traditional financial advisors or robo-advisors.

The first question read like-so: “Who do you think would be most likely to make a mistake managing your money?”​

We then asked the following two questions: “Who is more likely to lose your money?” and “Who will get you a better return on your investment?”

The results of the first question showed that the slight majority of millennials, 51.59 percent, believed that a robo-advisor is more likely to make a mistake while managing their money. 48.41 percent answered that they think a traditional advisor is more likely to make an error.

The results, and the subsequent trust of the millennial generation, were more clear for the next two questions. ​

A clear majority of poll participants, 62.35 percent, believed that robo-advisors were much more likely to lose their money than were traditional advisors. Only 37.65 percent of millennial investors thought a financial advisor was more likely to lose their money. But, this was not the most lopsided poll result.

More than double the percentage of millennials, 68.92 percent, thought a human advisor would get them a better return on their investments when compared to the 31.08 percent who thought the better ROI would come from a robo-advisor. 

It is clear that when it comes to their money, a sweeping majority of millennials still desire a real-life financial advisor to make the decisions, not a robo-advisor. This would help explain why many more millennials have used a financial advisor and not an automated investing service: The extra fees and more labor-intensive process will pay for itself when you have a human’s intuition making the investment decisions, rather than the cold calculations of a computer.

So, millennials will hand over their trust to technology when they need directions, the weather, or the answer to 5,678 * 75,003, but not when they are looking to turn $10,000 into $100,000 via Wall Street. Some things really do just need the human touch. 

What Are the Benefits of Either a Robo-Advisor or Traditional Financial Advisor?

LendEDU sought to discover why some millennials are drawn to traditional investment advisors and why some desire robo-advisors.

Only the millennial respondents that said they were working with a financial advisor were asked to explain why they like working with such an advisor. Similarly, only poll participants that have used a robo-advisor were asked to explain why they prefer working with a robo-advisor.  

The chart above may help explain why more millennials are using human advisors to invest their money as opposed to a robo-advisor: The perceived upsides of an automated investment app do not do enough to warrant using a robo-advisor over a traditional financial advisor.

For example, 9.01 percent of millennials that are using a traditional advisor said that they appreciate the human touch, while only 12.30 percent of millennials that are using a robo-advisor said they enjoy the technology. The difference is minimal, and technology, one of the huge selling-points of robo-advisors, is really not all too preferred to having the human touch guide your investment strategy.​

Another big pitch for robo-advisors is that they are relatively cheap when compared to hiring a financial advisor. As it turns out, the percentage of millennials that are drawn to the cost-efficiency of traditional advisors is ever-so slightly higher than the percentage of millennials attracted to the cost-efficiency of robo-advisors. It is important to remember that this is cost-efficiency, not overall cost. Sure, traditional advisors may be more expensive, but the cost is well worth it if millennials think humans can offer them more than robo-advisors. 

​In our poll, 27.87 percent of millennial respondents said they preferred robo-advisors because of their 24/7 accessibility; only 17.6 percent of respondents said the same of financial advisors. 24/7 accessibility is a major selling point for robo-advisors, and this proved to be their biggest advantage over traditional investment advisors. If it is 2 AM and you cannot sleep because your stressed about the performance of your investment portfolio, you will still be able to login to your robo-advisor app and quell those fears. Most human advisors actually do need sleep, so they cannot offer this level of accessibility. However, it appears that 17.6 percent of our respondents have a really good relationship with their financial advisor if they are able to reach them around the clock. 

The biggest discrepancy for this particular question occurred over how easy (or difficult) it is to get started with either a financial advisor or a robo-advisor. 53.65 percent of respondents said a traditional investment advisor made it easy to get started, while only 37.7 percent said the same of robo-advisors. One would think robo-advisors simplify the investment process, and perhaps they do. But, having a financial advisor allows you to bounce questions of a trained, knowledgable professional, and this could be greatly beneficial if you are a novice investor. Whereas robo-advisors may leave you with minimal guidance, human advisors can lead you through each moment of the investment process, which will make it much easier to get started. 

What Are the Drawbacks of Either a Robo-Advisor or Traditional Financial Advisor?

LendEDU asked our poll participants about the benefits of either a robo-advisor or traditional financial advisor, so naturally, we wanted to unmask the drawbacks of either option.

We asked only the people that said they were not working with a financial advisor to clarify why there were not doing so. 

When it comes to traditional investment advisors, the biggest obstacle for many is the cost of hiring someone to manage their investment portfolio. The two biggest complaints were related to affordability. 27.51 percent believed the benefits were not worth the costs, while another 37.17 percent of respondents simply admitted that they cannot afford a financial advisor. Another 24.91 percent were confident enough to handle their own investments, while 10.41 percent of millennial respondents stated they did not trust financial advisors.

Next, LendEDU asked only the folks that have not used a robo-advisor to explain further why they were not using an automated investment app.

Interestingly, the leading reason as to why respondents were not using a robo-advisor was simply because they have never heard about the service. 61.58 percent of millennials, or the overwhelming majority, stated this as their reason. Perhaps if robo-advising companies made a more concerted marketing effort then maybe they would see more users.

The second most prominent reason as to why millennials were not using a robo-advisor was that they “would rather work with a human,” which received 16.58 percent of the vote. Obviously, investing your money in the stock market is a major decision with serious consequences, good or bad. Because of the gravity that comes with investing, people would rather have a human to bounce ideas off of, not an emotionless computer. Further reinforcing this belief, 8.95 percent of our respondents, the third-highest percentage, said they were not working with a robo-advisor because they do not trust one to manage their money. 

Almost Half of Millennials Are Intimidated By a Financial Advisor

Finally, we asked our 502 poll participants the following question: “Which of the following best describes your opinion about financial advisors?”

While the majority of millennial respondents, 57.37 percent, believed hiring a financial advisor was not an intimidating experience, 42.63 percent still answered “Hiring a financial advisor is an intimidating experience.”

As a follow up to that question, the people who answered that hiring a financial advisor is intimidating were asked to clarify. The plurality of them, 32.71 percent, answered with “I am not sure where to get started, or where to find one.” 28.50 percent were worried that they would fall for a scam, while 23.36 precent were concerned about being overcharged, or paying high fees. Another 15.42 percent stated “I believe that my finances are a personal manner. I want privacy.”​

It was interesting to see that so many millennials were intimidated by the idea of hiring a traditional investment advisor. For robo-advisors, this could be a potential strategy to attract new customers. Downloading a robo-advisor app can be done from the comfort of your couch, and there is nothing intimidating about that!

Interestingly, in a previous poll LendEDU found that 58.76 percent of investment-minded millennials considered themselves to be scared of the stock market, while only 41.24 percent stated the opposite. In general, there seems to be an apprehensiveness to get involved with the stock market amongst many young Americans. It is only natural to be scared of something that you are new to, but you will only get over that fear by getting involved, otherwise your simply missing out on the opportunity to make a lot of money!


All of the data that was used in this report came from a poll that was commissioned by LendEDU and conducted online by online polling company Pollfish. In total, 502 millennial respondents participated in the poll that ran from August 10th, 2017 to August 11th, 2017. All respondents were between the ages of 18 and 34, which was ensured through Pollfish’s age quota filter. All of the respondents that took part in the poll had considered themselves to be currently saving for retirement. We ensured this by asking a screener question to best describe a potential poll participant’s current financial situation. If they answered “I would consider myself to be currently saving money for retirement,” they were allowed to proceed to the poll. All respondents were asked to answer each question truthfully and to the best of their ability.  

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