Gen X and Y reject robo-advice for face-to-face

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Gen x and Yers not keen on robo-advice.

A new report by ING DIRECT, The truth about Gen X and Gen Y, quashes the assumption that younger generations are more likely to embrace robo-advice, with almost 80 per cent wanting a face-to-face advice relationship.

Mark Woolnough, Head of Third Party Distribution at ING DIRECT, commented: “Relationships have always been the cornerstone of successful and sustainable advice partnerships and it’s refreshing to see that the more digitally-savvy younger Australians recognise the value of face-to-face financial advice.

“This shows that while there is a place for online solutions, they should complement personal advice relationships and not be at their expense.”

A strong appetite for advice among young Australians

While less than five per cent of Gen X and Gen Y currently have a financial adviser, the report found that they recognise the value and importance of advice with more than half intending to seek advice in the future.

Those whose parents use an adviser most strongly recognise the value of advice, with 68.7 per cent stating that advice delivers benefits.

Mr Woolnough commented: “The net wealth of Gen X and Gen Y is approximately $1.4 trillion[1], and coupled with an intergenerational wealth transfer of $2.4 trillion[2] occurring during the next three decades, that’s a huge opportunity for advisers.

“The recognition of the value of advice, particularly among those whose parents are advised, means that there is a rich pipeline of new clients among the existing retiree and pre-retiree client base of most advisers.”

Fees holding young Australians back

The key factor holding Gen X and Gen Y back from seeking advice is the perception of high fees. Both generations expect to pay a maximum of $250 for comprehensive face-to-face advice, demonstrating a clear imbalance between the cost of advice and what young Australians think is appropriate to pay.

While this may be an unrealistic expectation, it bodes better than for robo-advice, which the majority believe should be free.

Mr Woolnough commented: “While $250 may be far off the mark in terms of the true cost of personal advice, this presents an opportunity for advisers to educate and take these younger Australians on a journey, demonstrating the real value that advice can add.”

[1] ING DIRECT analysis based on McCrindle demographics data and ABS Household Income & Wealth data
[2] ING DIRECT Women & Finance Report 2015

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