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Client loyalty

Understand the extent of investors' loyalty to the idea of working with a traditional financial advisor.

Measuring client loyalty

How likely are clients to leave their traditional financial advisor for a digital "robo-advisor"? Short answer: Not very. Our research found that even across age demographics, investors were more inclined to taking financial advice from a person than solely from a robo-advisor. Our findings underscored just how critical relationships are to investors when dealing with something as important as their long-term financial success.

How technology can help boost margins and retain clients

Vanguard has provided advisors a blueprint to retain clients and add more value for investors in its recent study.1 The latest technological tools at advisors' disposal can be implemented to better serve clients and enhance their experience.

Digitally advised clients show a very high satisfaction rate with their advisors, with about 77% of them reporting being satisfied.1 This stems from the variety of benefits that investors perceive digital advice to offer, including financial value. Investors believe they are 5% closer to their financial goals because of their robo-advisor. Because the relative advantages clients say they derive from digital and traditional advice are so different, it suggests advisors can use elements of digital advice to complement traditional advice.

Perhaps technology's biggest advantage is tackling easily automatable tasks that can be tedious and time-consuming for an advisor. For example, technology can be tasked with sending investors financial news relevant to their portfolios and providing them with timely market updates. This frees more time for traditional advisors to devote to strengthening their emotional connection with clients—as the study points out, this is the area where traditional advisors rate highest with investors.

Putting it into practice

Advisors should optimize their delivery strategy by adopting technological tools to complement their existing services.

Don't just automate, integrate

Automating certain services in your practice is an effective way to expand. Many media outlets fearmonger by pitting robos against traditional advisors, but in reality, a lot of the technology that robos use can be effectively integrated to optimize your practice.

The key to sustained growth is to cater to a client's needs in the most efficient way possible, and automating certain aspects of portfolio management give that opportunity to financial advisors. Vanguard's recent study found that 88% of digitally advised clients would be willing to switch to a human advisor if they make a switch. Nonetheless, lots of investors express a clear desire to have technology integrated into their advice.1

This is a clear win for traditional advisors because technology, properly used, increases efficiency. Many processes can be tasked out to software and give advisors more time with new clients to build connections and deepen relationships.

This aligns with the client's preferences and could lead to higher levels of satisfaction—in addition to expanding your practice.

Putting it into practice

Tax efficiency and rebalancing are great examples of tasks that automation can optimize, and investors actually prefer a digital experience with these functions.

Surprise: Millennials also want a human advisor

Millennials have integrated technology into their lifestyle, their day-to-day decision-making, and even their finances as much as any generation. However, Vanguard's recent study1 breaking down human and digital advice shows that millennials still want human financial advice along with automated services.

Vanguard sampled 1,500 investors and found that generational demographics don't play a factor in investors' preference for advisor services.

Millennials do show a disposition to have highly automatable processes delivered digitally. But, like investors in other age groups, they prefer an integrated approach featuring a human advisor. For example, as their financial situation grows in complexity with age, they recognize the need to lean on human advice to tackle the nuances in their portfolios.

Advisors don't need to customize their delivery channel to cater to a younger generation of investors. In fact, human advisors have an edge with millennials in coaching them through market volatility and steering them toward their financial goals.

Putting it into practice

Advisors should consider a hybrid approach with millennials, and concentrate on financial coaching to steer them through market swings.

Robo-advised clients crave human interaction

Vanguard's recent survey1 of 1,500 investors finds that robo-advised investors are very willing to consider a human advisor, and that emotional value is the missing link in what digitally advised clients desire.

Less than a quarter of human advised clients feel they would have peace of mind without their advisor. Human advisors provide significant reassurance to their clients. In fact, 80% of those surveyed felt peace of mind with their traditional advice.

Meanwhile, digital advice only increases peace of mind by 12%, the survey found. These eye-opening figures highlight the fact that digitally advised investors have a lower level of overall peace of mind with their services as compared to human advice. These findings are in lockstep with the idea that human advisors provide critical emotional value to their clients, and those who are robo-advised are missing the trust and personal connection offered by a human advisor.

Putting it into practice

Traditional advisors should consider products for their clients that outsource easily automated details in financial management and free up time to capitalize on their emotional connection.

Human advisors dramatically increase clients' peace of mind

Chart showing how human advisors dramatically increase clients' peace of mind

Note: Investors were asked about their agreement with the statement, "I have 'peace of mind' knowing that a human (or digital) advisor is looking after my investments." The phrase "peace of mind" was defined as, "refers to a positive feeling knowing that your investments are on track." Investors were subsequently asked to imagine they did not have a human (or digital) advisor and were managing their investments on their own. They were asked to estimate their peace of mind in that situation.

Sources: Vanguard and Escalent, 2021.

Investors consider switching from robo to advisor

The financial industry's perception of new technologies often dictates that advancement could undermine the future prospects for many industry-specific jobs, including financial advisors. However, a new Vanguard study1 signals quite a different future than one where digital advice supersedes the traditional advisor.

Contrary to many advisors' long-held apprehensions, digital advice is a poor substitute for a human advisor. The clearest indicator of this is just how many digitally advised clients are considering a human advisor in the future. An eye-opening 88% of those serviced by a robo advisor are either willing or extremely willing to consider a human advisor in the future, and a meager 6% were committed solely to digital advice moving forward.

While human-advised investors remain fiercely loyal, digitally advised clients tend not to share that same sense of allegiance with their digital platforms. The study digs deeper into this disparity, but at the core, human advisors provide an irreplaceable personal connection that digital advice cannot match.

Putting it into practice

This study dramatically changes the view that robos are a threat to advisors. In fact, disenchantment with robos is clearly creating a ripe client-acquisition opportunity for traditional advisors.



Digital-advised investors are willing to switch to human advice

Respondents were asked, "on a scale of one to seven, how willing would you be to work with human financial advisor in the future?"

Chart depicting that digital-advised investors are willing to switch to human advice

Note: The sample in this figure includes all responding investors who only have digital advisors (135 in total).

Sources: Vanguard and Escalent, 2021.

Loyalty to advisors stronger than ever

The financial industry is changing quickly. Driving much of the change is the array of technological advances that are transforming the economy. Despite these rapid changes, loyalty to traditional financial advisors remains incredibly robust.

Our 1,500-investor study1 found an enduring bond between a human advisor and their clients. The connection is so highly desired that 93% of clients with a human advisor would maintain their relationship with a human advisor even if they were forced to sever ties with their existing advisor.

That's not the case with robo-advised clients. In fact, they are overwhelmingly willing to consider a human advisor in their future relationships. Most of their sentiment stems from the qualitative values traditional advisors bring to the table. Human advisors are much better at building a strong emotional connection with their clients, which in turn fosters loyalty. Additionally, clients find human advisors better equipped to handle growing financial complexity as clients age.

Putting it into practice

Digital advice is best suited to being integrated with human advice rather than replacing it because the emotional connection of human advice is too valuable to clients. Thus, these findings present an opportunity for advisors rather than a threat.

Vanguard Research
Quantifying the investor's view on the value of human and robo advice

Examine Vanguard's complete findings into investor's perceived value of advice by reading the research report quantifying the investor's view on the value of human and robo advice.

Learn more about our three themes


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Disclosures and footnotes

1 Paulo Costa and Jane Henshaw. 2022. Quantifying the investor's view on the value of human and robo-advice. Valley Forge, Pa.: The Vanguard Group.


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