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The Millennial generation has already taken to robo-advisors

By Mathieu Carbasse | September 27 2016 01:29PM

According to J. D. Power's 2016 investor satisfaction survey, robo-advisors appeal most to Millennial investors. In fact, two-thirds (66%) of Canadians born between 1982 and 1994 indicate that they would be interested in robo-advice if their financial services provider were to offer it, compared to 54% of all investors.

What's more, the percentage of Millennials who say they have already used a robo-advisor is almost double that of the overall market (11% compared to 6%, respectively). Among the Millennials who used a robo-advisor, 54% are either as satisfied or more satisfied by their experience with the robot than they were with their original self-directed firm.

“The robo-advisor market in Canada is still relatively small, but there are a number of factors likely to drive continued growth,” says Mike Foy, director of the wealth management practice at JD Power. He points out that the Millennial generation is now the largest segment of the workforce; not only do they feel more comfortable with technological-based solutions than their parents, but they are also more likely to seek advice as their financial life improves and becomes more complicated.

Effects of CRM2 yet to be felt

Despite all the attention that has been paid to the second phase of the regulators' Client Relationship Model (CRM2), which aims to increase investor transparency, there is little or no evidence that there has been progress in terms of giving investors a better understanding of the fees they are paying.

“The needle really hasn’t moved in five years," says Foy. In 2012, only 39% of do-it-yourself investors said they had a complete understanding of the fees they paid, and in 2016 that number remains 39%. "Increased disclosure does not automatically create transparency", argues Foy. He says companies need to make sure they relay information to clients effectively, because when it comes to fees there is a very strong correlation between understanding and customer satisfaction.

National Bank tops for satisfaction

The J.D. Power study ranked National Bank Direct Brokerage first for self-directed investor satisfaction for the second consecutive year with a score of 774 on a 1000 point scale. The bank received particularly good grades for its interaction, account information, and its product offering. Further down in the rankings came BMO Investorline (762), CIBC Investor's Edge (751) and RBC Direct Investing (751).

The report stresses that customer satisfaction results in referrals as well as loyalty. On average, moderately-satisfied investors (i.e., those with an overall satisfaction score of 700-799) make 1.3 net positive comments about their firms, while those in the higher satisfaction range (800-899) are more than twice as likely to do so, with 2.7 net positive comments. The recommendations almost double again among those with satisfaction levels over 900, who make an average of 5.2 net positive comments.

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