Wells Fargo/Gallup Survey: Investors Curious about Digital Investing, More Optimistic about Economy Prior to Brexit
Investors value “robo” and human advice for different reasons
Advisor technology adoption a sign of trust for more than half of investors
ST. LOUIS, MO. - July 19, 2016 – Prior to the British vote to exit the European Union, U.S. investor optimism had rebounded in the second quarter, following a rocky first quarter for the markets, according to the second quarter Wells Fargo/Gallup Investor and Retirement Optimism Index survey, conducted May 13-22 with 1,019 U.S. investors, who have a total of $10,000 or more in savings and investments.
The survey also reveals investor attitudes about digital advice solutions and adoption of digital and technology tools by financial advisors.
The Optimism Index rose 22 points in the second quarter to +62, returning the index to the level seen in the last half of 2015, before it dipped to +40 in the first quarter of 2016.
Non-retired investors scored highest on the optimism index, with the index increasing 27 points to +68. The index rose 10 points to +45 among retirees. Most of the gains in the overall index result from investors’ increased optimism about the 12-month outlook for the stock market as well as about reaching their 12-month investment targets. Additional gains were seen in investor optimism about economic growth as well as maintaining or expanding their household income. There was no change in investor perceptions about unemployment, inflation or reaching their five-year investment goals.
What’s a Robo-advisor?
For the first time, the Wells Fargo/Gallup survey asked specific questions about “robo” advisory services, described as “digital advisory services that use computer algorithms to select stocks and other investments for people based on the information people provide about their risk tolerance and goals.”
While the financial services industry is ramping up efforts to bring digital advice tools to consumers, automated advice services have not yet made it onto the radar screen of most U.S. investors, according to the survey. Less than half of investors (45%) with $10,000 or more in investments say they have heard about the emerging technology, and just 5% of investors report having already used a robo-advisor.
“Automated investing tools are still in their infancy, but we expect awareness to grow quickly,” said Devon McConnell, head of Digital for Wells Fargo Advisors. “Similar to online shopping ten years ago, there is an adoption curve and we anticipate the same pattern will unfold as more investors become familiar and comfortable with these new ways of investing.”
Investors Split in Their Use of Online Financial and Investment Tools
One reason robo-advice has yet to catch on with more investors is likely revealed in the finding that less than half of investors say they go online to make changes to their investments (46%), rebalance their investments (45%), calculate their retirement needs online (46%) or get investment advice (24%).
While about six in 10 investors report doing basic financial tasks online – such as reviewing account fees and investment statements or transferring money between funds – half of investors say interacting with their primary financial services firm through a website or mobile app is most important to them.
These attitudes are sharply different by age. Most investors under age 50 (69%) say they rely on the website or mobile apps to interact with their primary investment firm, while investors 50 and older mainly rely on the branch office or telephone (59%).
Investors Trust Advice Technology Used by Advisors
While awareness of robo-advisors is low, most investors who have a personal financial advisor are open to that person using digital investing tools with their portfolio. Six in 10 investors would like their advisor to use the tool, with investors aged 18 to 49 more interested (68%) in having their advisor use the tool than those 50 and older (55%).
Similarly, investors indicate a level of trust in advisors who use technology. Asked how they would feel about advice they might receive from a financial advisor who had a good website, apps and digital investing tools, the majority of investors (54%) say they would trust the advice a lot or a little more than advice from a less tech savvy advisor. Only 15% would trust a technology-proficient advisor less, while 28% say they would trust that person about the same.
This sentiment is particularly high among investors under 50, with 63% saying they are more likely to trust an advisor who offers them access to sophisticated digital tools, compared to 48% of investors 50 and older.
“We expect the healthiest financial relationships of the future to have digital components that will deepen client engagement and trust,” said McConnell. “We know that a strong digital experience is important to investors, whether they already have a financial advisor or they’re just starting out in their investing lives.”
Investors Prefer Limiting Own Management of Investments, Value Human and Digital Advice for Different Reasons
Investors who know at least a little about robo-advisors largely believe the biggest advantages of human advisors are in helping people understand their investments (91% say this applies more to human advisors) and making people feel confident about their investments (90%). At least seven in 10 investors familiar with robo-advice also identify human advisors as better at advising clients on risk (83%) and taking each client’s entire financial picture into account (77%).
By contrast, robo-advisors earn their highest marks for simplifying the investing process and having the lowest fees. Investors also rank robo-advisors relatively well on matching investors’ investments to their risk tolerance and being reliable in turbulent markets.
When it comes to their own involvement in selecting, monitoring and changing their investment portfolios, most investors (64%) say they want to be moderately or a little involved, and another 4% want no involvement. Just 32% prefer heavy involvement.
Preferences for portfolio management differ by asset level. For example, investors with $100,000 or more in investments express a stronger preference for being heavily involved than those with fewer assets (37% vs. 26%).
However, in line with investors’ reluctance to be too heavily involved in managing their portfolio, 46% of investors – including 55% of men but only 38% of women -- say they are comfortable picking their own investments. Significantly more investors, 61%, are comfortable monitoring and rebalancing their investment portfolio, although there is still a gender gap: 67% of men vs. 53% of women are comfortable doing this.
About the Wells Fargo/Gallup Investor and Retirement Optimism Index
These findings are part of the Wells Fargo/Gallup Investor and Retirement Optimism Index, which was conducted May 13-22, 2016, by telephone. The Index includes 1,019 investors randomly selected from across the country with a margin of sampling error of +/- four percentage points. For this study, the American investor is defined as an adult in a household with total savings and investments of $10,000 or more. About two in five American households have at least $10,000 in savings and investments. The sample size is comprised of 73% non-retirees and 27% retirees. Of total respondents, 40% reported annual income of less than $90,000; 60% reported $90,000 or more. The Wells Fargo/Gallup Investor and Retirement Index is an enhanced version of Gallup’s Index of Investor Optimism that provides its historical data. The median age of the non-retired investor is 47 and the retiree is 69.
The Index had a baseline score of 124 when it was established in October 1996. It peaked at 178 in January 2000, at the height of the dot-com boom, and hit a low of negative 64 in February 2009.
About Wells Fargo & Company
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,600 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries and territories to support customers who conduct business in the global economy. With approximately 268,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 27 on Fortune’s 2016 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Wells Fargo perspectives are also available at Wells Fargo Blogs and
Gallup delivers analytics and advice to help leaders and organizations solve their most pressing problems. Combining more than 80 years of experience with its global reach, Gallup knows more about the attitudes and behaviors of employees, customers, students and citizens than any other organization in the world.