After the past few years of digital transformation and a do-it-yourself investing revolution, younger investors are at a crossroads. While many want guidance and the vast majority are open to digital advice from their brokerage firms, few understand how technology manages their portfolio. That lack of understanding could pose challenges for firms trying to establish longer-term relationships with younger, do-it-yourself investors, according to the JD Power2023 US Self-Directed Investor Satisfaction Study.
2023 Study key takeaways
- Millennials and Gen Z are highly receptive to digital advice. Younger self-directed investors within the do-it-yourself segment are hungry for advice. The majority are receptive to the idea of receiving digital, or robo-advice. Currently, 86% of Gen Z investors and 79% of Millennial investors are interested in receiving robo-advice. Those numbers have increased 5 percentage points and 3 percentage points, respectively, during the past three years as market conditions have become more challenging.
- Widespread lack of understanding. Despite strong interest in digital advice, very few users of the technology understand how it works. Just 22% of investors who currently use robo-advice offerings from their brokerage firm say they “completely understand” how the technology manages their portfolio. Net Promoter Scores decrease significantly when investors say they are unsure how the digital technology works.
- Human support is a key variable. Don’t be fooled by the terms do-it-yourself and robo-advice. Self-directed investors are still looking for human support when it comes to onboarding, answering technical questions and resolving problems. Human support also plays a key role in providing greater transparency and trust in digital advice.
Fidelity (704-based on a 1,000-point scale) ranks highest in self-directed investor satisfaction among investors seeking guidance. E*Trade (698) ranks second and Charles Schwab (695) ranks third. Vanguard (734) ranks highest in self-directed investor satisfaction among do-it-yourself investors. T. Rowe Price (724) ranks second and Charles Schwab (717) ranks third.