April 22, 2022
Conventional wisdom says human financial advisors are under siege as technology plays a bigger role in advice offers. But a recent Vanguard survey of more than 1,500 investors found that interest in human advisors remains strong.1
“The industry has focused on how digital services could potentially replace human advisors, but less attention has been paid to the possibility that digitally advised clients would consider switching to human advisors,” said Paulo Costa, Ph.D., a behavioral economist in Vanguard Investment Strategy Group, who led the study.
Seventy-six percent of the human-advised clients surveyed said they would seek out another human advisor, and 17% said they would search for a service that combines human and digital advisors. And 88% percent of the digital-only respondents expressed a willingness to switch to a human advisor in the future.
“People want human advisors, but they also see a role for technology in the delivery of services,” Costa said.
The study examined investor preferences regarding advice and the perceived trade-offs between the human and digital kind. It investigated whether technology was a threat to financial advisors by examining loyalty to both human and digital advisors and the likelihood of clients switching services.
The typical human-advised client is quite different from those who get their advice digitally, Costa explained.
“Clients with a human advisor indicated that they don’t have the time, willingness, or ability to manage their investments,” he said. “And as financial life gets more complex, investors seem to want more personalized attention that you get with a human advisor.”
Note: The sample in this figure includes all clients who have only human advisors (1,175 in total).
Source: Vanguard, 2021.
Note: The sample in this figure includes all clients who have only digital advisors (135 in total).
Source: Vanguard, 2021.
The survey produced other interesting and important findings, including:
The survey results show that investors prefer some aspects of human advice over digital but perceive value in all advice services, Costa said.
“In light of their diverse needs, it is critical that investors have access to a wide range of advice services,” he said. “This level of investor access helps advisors pursue the right clients based on their service model and also helps them understand which services can be outsourced to automation to help scale their practices in a cost-efficient manner.”
1 The study, conducted in July 2021, surveyed 1,518 investors who reported having an advice service at the time of the survey. The sample is representative of U.S. investors by age, gender, and other demographics with at least $100,000 in investable assets. Approximately 75% reported using a human advisor, with the remaining 25% using digital advice or both digital and human advice.