Majority of investors favor the human touch over technology

Despite increasing automation in nearly all aspects of the consumer experience, 84 percent of investors say that financial advisors will always be needed and will not be replaced by automated investing technology, according to the first quarter 2019 Wells Fargo/Gallup Investor and Retirement Optimism Index survey.

“Financial advisors remain a vital source of advice for most investors,” said Wayne Badorf, head of intermediary distribution at Wells Fargo Asset Management. “People want advice and ‘the human touch’ when planning their financial futures. At the same time, they are prepared to embrace technology as part of the process; it’s not an either-or scenario. Financial advisors and technology can work together to help investors reach their saving and retirement goals.”

Seventy-eight percent of investors either work with a financial advisor (56 percent) or would like to work with one (22 percent), suggesting that investors continue to want guidance from advisors when saving, investing and preparing for retirement. Seventy-three percent say the financial benefits that come from professional advice are worth the cost. When asked what they value most about their financial advisor, 68 percent of those who work with one cite the advisor’s role as a resource for answering questions.

Investors expressed an openness to technology playing a role in their financial planning — just not at the expense of working with an advisor. Only 24 percent say they currently use automated investing technology for their own investing, without the assistance of an advisor. But 56 percent say they would prefer working with a financial advisor who uses automated investing tools on their behalf.

In addition, investors look to their advisor for support in many other aspects of their lives. When ranking important or critical services provided by financial advisors, investors cite “keeping me motivated and on track with my financial goals” (69 percent), “understanding my personal life and family dynamics” (63 percent), helping clarify broader life values and goals (55 percent) and including teenage or older children in financial planning discussions (53 percent).

The survey, which was conducted Feb. 11–17, queried 1,029 U.S. adults with $10,000 or more invested in stocks, bonds or mutual funds.

Among investors who have a financial advisor, 68 percent say they want a collaborative relationship, meaning the advisor handles investments but in close consultation with the investor. Just 14 percent say they want to invest on their own with only investment-related advice from their advisor and 18 percent say they want the advisor to take care of investing decisions on their behalf, with no consultation at all.

When asked about the benefits of using a financial advisor, investors who work with one say advisors understand their personal investing needs (94 percent), care about them and their financial well-being (93 percent), allow them to devote more energy to other things (89 percent), help them feel more confident about their finances (93 percent) and relieve stress in their home life (78 percent).

Fewer than half of investors with an advisor, 46 percent, say they have sought a second opinion from another expert to confirm their advisor’s recommendations.

Investors also say they want to communicate with their advisor on a regular basis — on average, three times a year. When asked how they want to communicate, the majority of investors (63 percent) say they prefer a personal connection, including in-person meetings (39 percent), phone calls (22 percent) or video calls (2 percent). Just 20 percent say they prefer to connect through Internet chat and only 18 percent say they want to review their investments on their own, without help from an advisor.

Among those who do not use a financial advisor, 73 percent say advisors cost too much, 52 percent say they would rather purchase index funds or automated investments directly and 40 percent say they can invest better on their own.

The survey showed some weakening in investor confidence. Overall, the Wells Fargo/Gallup Investor and Retirement Optimism Index slipped to 90 in the first quarter, down from 98 in the fourth quarter of 2018. Investors remain generally optimistic, however, about a range of economic conditions and financial expectations:

• Fifty-one percent say they are either somewhat optimistic or very optimistic that they will achieve their investment targets over the next 12 months, a sentiment that increases when looking further into the future.

• Sixty-two percent say they are somewhat optimistic or very optimistic about achieving their goals in the next five years.

• Seventy-five percent say they are highly or somewhat confident they will have enough money to maintain their lifestyle in retirement, up from 72 percent in November and 69 percent in August.

• Fifty-four percent say they are either somewhat optimistic or very optimistic about economic growth.

• Fifty-eight percent say they are either somewhat optimistic or very optimistic about the unemployment rate.

Meanwhile, the percentage of investors who say it is a good time to invest in the financial markets (64 percent) is roughly the same as the 67 percent in August 2018 and 68 percent in May 2018. Investors are less upbeat about the performance of the stock market (49 percent are optimistic about its 12-month outlook) and about inflation (31 percent are optimistic).

To achieve their investing targets, investors are more likely to say their main investing goal is to maximize growth (61 percent) than to protect from major losses (39 percent).

March 2019 marked the 10-year anniversary of the Dow Jones Industrial Average’s low point, which is when the U.S. began to climb out of the 2008–09 Great Recession. Investors say they still feel the influence of the recession. Fewer than half of investors (45 percent) say they feel more confident today about their ability to save for a comfortable retirement than they did during the Great Recession.

Among different age groups, 47 percent of those ages 18–49, 45 percent of those ages 50–64 and 28 percent of those 65 and older are more confident today. In addition, 60 percent predict that over the next 10 years, the U.S. economy will experience another period as bad as the 2008–09 recession.

At the same, 65 percent of investors say they are better at shrugging off market volatility 10 years later; 35 percent say it bothers them just as much as before.

“As we enter Year 10 of the economic recovery, not even half of investors feel more confident about their ability to prepare for retirement,” said Badorf. “How do we help people feel more confident? It comes down to good advice, services and solutions from a trusted advisor."

The results of this Wells Fargo/Gallup Investor and Retirement Optimism Index are based on a Gallup Panel web survey completed by 1,029 U.S. investors, ages 18 and older, from Feb. 11-17. For the study, the American investor is defined as an adult in a household with stocks, bonds or mutual funds of $10,000 or more, either in an investment account or in a self-directed IRA or 401(k) retirement account.