Consumers Still Wary About Robos
Patrick T. Leary and LIMRA are unsure about the future of robo platforms. And so, it seems, are consumers.
Leary will deliver the closing session today at LIMRA’s 2016 Distribution Conference for Financial Services in Miami. Leary, who is LIMRA’s corporate vice president of distribution research, will discuss “The Evolution of Advice.”
The session will include “hot off the press” LIMRA survey data from consumers across the U.S. and Canada, Leary promised. A few of those survey questions asked consumers about their opinions and experiences with robo-advisors.
Among millennials, 17 percent were familiar with robo-advisors, while that figure dropped to 11 percent among Generation X. Just 4 percent of baby boomer respondents said they were familiar with robos.
Respondents had two general concerns of significance, Leary said. Not surprisingly, consumers are concerned about security and about who will have access to their personal information.
“The other thing was the lack of being able to call someone,” Leary said. “If the market tanks, who do I call? Is the robo-advisor going to call me back?”
Response to robo-advisors has been fairly strong over the past several years. Nearly 30 percent of affluent Americans already are using some type of robo-advisor to manage a portion of their assets, according to a fall 2015 study by Cogent Reports.
Another 22 percent said they are thinking about placing money with a robo-advisor in the near future. Those results mirror the findings and thoughts of LIMRA researchers.
“There’s a lot of money pouring in to these platforms, but our feeling is right now it’s more to the self-directed consumers,” Leary said. “Right now, those people who really need advice the most are the least likely, at this point, to be looking to a robo platform.”
A couple of respondents to the LIMRA survey had experience with a robo-advisor and “they loved it,” Leary added. Others were more hesitant. One concern they had is the time it takes to enter all their personal information into a website.
“A lot of people were like ‘You know that sounds like a lot of work. I’d rather just keep my little spreadsheet at home and just keep everything in my shoe box,’” Leary said. “And you’d hear things like ‘That’s why I pay a professional. So I don’t have to do all this stuff.’”
Trust Is the Key
One possible end result is some type of hybrid robo-advisory tool backed up by a human advisor, Leary explained. Research doesn’t support mass robo-only advisories at this point, he said.
Trust is an essential element in the advisor-client relationship and simply cannot be replicated by a robo. But that’s OK, Leary said.
“I think we get wrapped up in our industry about having to be on the cutting edge of everything and the latest and greatest of everything,” he said. “At the end of the day it’s about providing options to people.”
Leary will share LIMRA research on millennials, a population segment that has reached professional age and cannot be ignored. LIMRA studies show millennials are more likely than those in other demographic groups to have their savings and investments at their primary financial institutions.
Millennials are also more receptive to financial planning than are other groups. A December study revealed that 60 percent of millennials want to have all their financial needs met in one place. Forty percent said they would consider a plan through their bank, compared with only 22 percent of those in other age groups.
Technology means millennials are “more empowered,” Leary said. But while some things change, the need for trust remains the same, he added.
“Our goal is to be the trusted source, both as a company and as an advisor,” he said. “Our research shows there are three ways to build that trust. You need to listen, you need to educate, and you need to engage in new and different ways.”
Financial Literacy
Education leads to engagement, which invariably leads many engagers into an advisor-client relationship. Promoting financial literacy is an investment that will likely pay off down the road, Leary said, noting that his former high school recently kicked off a course in teaching financial skills.
It’s a new and different world from the days when an advisor could depend on a homogeneous client base that grew from word of mouth. Clients who rarely changed jobs and had limited opportunities.
“Today we see more and more of this emerging consumer who wants to engage in new and different ways,” Leary said. “Regardless of what you talk to them about, it all comes down to having a trusted relationship regardless of channel.”
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
© Entire contents copyright 2016 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News