Do-it-yourself investors are having trouble understanding how technology manages their portfolios, finds a just released J.D. Power 2023 U.S. Self-Directed Investor Satisfaction study.
Despite the strong interest in digital advice, just 22% of self-directed investors who utilize robo-advice say they “completely understand” how the technology works with their investments. Such a gap could “pose challenges for firms trying to establish longer-term relationships with younger, do-it-yourself investors,” said J.P. Power.
“Digital, or robo-advice, presents an ideal platform to provide value-added services that can help grow and develop higher value relationships over time,” said Craig Martin, executive managing director and head of wealth and lending intelligence at J.D. Power, in a statement. “But firms need to do a better job explaining how that digital advice works and articulating a clear value proposition for investors. Right now, investors are interested, but if they are going to stick around for the long haul, they need to understand the value of the service they are receiving.”
The findings come at a time when more younger workers are interested in digital advice, finds J.D. Power. According to the study, 86% of Gen Z and 79% of Millennial investors are interested in receiving robo-advice, with those number increasing five and three percentage points, respectively, in the past three years as markets turned volatile.
Yet, while a higher number of workers are accessing robo-advice, J.D. Power urges advisors against overlooking human support. The study found self-directed investors are still looking for human support when it comes to onboarding, answering technical questions and resolving problems.
Study Rankings
While Charles Schwab earned the top stop on J.D. Power’s recent full-service investor satisfaction rankings, Fidelity was ranked the highest in self-directed investor satisfaction among those seeking guidance. This was followed by E*Trade who ranked second, and Charles Schwab in third place.
Vanguard ranked highest in self-directed investor satisfaction among do-it-yourself investors, followed by runner-up T. Rowe Price and Charles Schwab.
J.D. Power’s Self-Directed Investor Satisfaction study, now in its 21st year, measures self-directed investors’ satisfaction using seven factors: trust; digital channels; the ability to manage wealth how and when I want; products and services; value for fees; people; and problem resolution.
The study is based on responses from 5,165 investors who make all their investment decisions without the counsel of a full-service dedicated financial advisor. It was fielded from October 2022 through January 2023.
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