Robo-advised clients could be untapped market for advisers

Some 88 per cent of investors with digital advisers are willing to switch to a human adviser, according to a survey of 1,500 investors by Vanguard.

In the report, called “How investors perceive human and digital advice”, the company said it was seeking to answer the question of whether advisers should view robo-advice as a “cannibalising threat” to their existing client base.

However, when investors with human advisers were asked what type of adviser relationship they would search for in the future if they had to leave their current adviser, 76 per cent said they would look for a human adviser. 

Robo-advised clients could represent an untapped and under-targeted market to convert to human advisors, especially as their needs become more complexVanguard

A further 17 per cent said they would search for a service combining a digital and human adviser, and just 4 per cent said they would prefer a digital adviser or service.

In the report, Vanguard said despite the common headlines about technology replacing humans, the data suggests that investors have a strong loyalty to their human financial advisers. 

“Confirmation bias could be at work here, with respondents validating the choice they have already made,” it added, though the number of robo-advised clients saying they would likely to move to human advice means this is likely not the primary explanation.

“This contradiction provides important data for advisors as they think about prospecting and bringing in new business. 

“Robo-advised clients could represent an untapped and under-targeted market to convert to human advisors, especially as their needs become more complex.”

Because human-advised investors are not likely to switch to digital services, they must value interaction with their human advisors, the report said.

Indeed, in a “value breakdown” of the service offered by human advisers, 25 per cent of their value was emotional (including trust and confidence in the adviser, assurance in times of market volatility and peace of mind that you will achieve your goals).

This is in comparison to 18 per cent of the digital advisers’ value.

The respondents attributed a 40 per cent score for human advisers’ portfolio value, compared with 47 per cent for the digital adviser.

Both scored 35 per cent for financial value.

Vanguard said: “Investors believe that human-advised clients derive higher levels of emotional value from their financial advisors than digital-advised investors get from theirs. 

“In seeking to convert robo investors, advisers can leverage emotional value to help position their services.”

sally.hickey@ft.com