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2015 Young Consumers - Robo AdvisorsA new LIMRA study shows 81 percent of consumers were unfamiliar with the automated investment platforms, better known as “robo-advisors.” Despite current low awareness, the potential growth of robo-advisors remains high.

At last week’s 2015 LIMRA Annual Conference, Dan Egan, director of behavioral finance at Betterment, a robo-advisor company, outlined the potential as, “… a blue ocean of consumers in front of us. People that have never had financial advice ever offered to them.”

According to the study, early adopters to robo-advice tend to be younger and more comfortable with technology. (See chart.)

Automated advice also is appealing to higher affluence investors ($500,000 or more) who are “test driving” the robo-advisors with smaller sums to see if this is a viable option going forward. This finding is consistent with an earlier study by the LIMRA Secure Retirement Institute that revealed nearly 40 percent of affluent investors prefer to make investment decisions without help from a professional.

While financial professionals might have initially seen robo-advisors as a threat, large investment firms are adopting the technology specifically to help advisors expand their markets. Advisors who include robo-advisors as part of their practice they can better serve today’s consumers who want an omnichannel experience with financial services.

Currently, the robo-advisors available to consumers tend to handle straightforward investment decisions. They are not used for more sophisticated transactions such as insurance, or retirement and estate planning. This presents an important opportunity for advisors.

Prior LIMRA research found that among Generation Y, half want professional advice on life insurance and 8 in 10 want to learn about savings options and strategies. In addition, 60 percent say they will talk with a financial professional who is recommended by their parents.;

Because Gen Y is more comfortable with technology, financial professionals can use a robo-advisor to help acquire new and emerging affluent clients. Use of the platform by advisors also provides a reason to engage with the adult children of existing clients.

Advisors who leverage this technology stand a better chance of retaining these clients as their needs for financial advice go beyond what the robo-advisor can provide.

For this study, LIMRA conducted a quantitative consumer survey of 1,000 participants, weighted to represent the U.S. population.

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