Robo-advice gaining traction among young investors

As the advice industry continues to explore hybrid advice options to meet strong advice demand, a report has shown that use robo-advice tools is rising, while the value of a professional adviser has also risen.

Based on a survey of 5,038 investors with at least $100,000 in investable assets, the Cogent Syndicated 2025 Investor Brand Builder report found the number of people using robo-advice has reached its highest level in three years, with one in five affluent investors utilising this service.

This growth has been largely fuelled by Gen Z investors as more than half (55 per cent) now report using robo-advice, up from 39 per cent in 2023. Millennials (42 per cent) and Gen X (24 per cent) investors have also been a key driver behind this trend with both demographics showing a higher uptake since 2023.

Notably, gender appears to impact their likelihood of utilising these types of services with wealth management researcher Cogent saying robo-advice's user base is typically male-dominated. However, women are warming up more to the concept as 26 per cent now indicate they are likely to adopt the service.

While digital and hybrid advice space has seen growing interest of late, the report suggested that there is simultaneously strong demand for human financial advice, finding that more than six in 10 affluent investors who are likely to adopt or are current users of robo-adviser services “rate access to an investment professional as very important”.

In aggregate, the findings showed 57 per cent of affluent investors value access to professional financial advice marking a slight increase from 53 per cent in 2023, underscoring the enduring need for human support.

Cogent Syndicated senior director Steve Ethridge said this rise in interest among affluent investors is an opportunity for wealth management firms to differentiate from the market and drive growth in the young investor pool.

“In this transformative environment, success hinges on a provider's ability to adapt and align with the wants and needs of diverse affluent investors. They must foster trust through consistent performance, but also leverage digital tools to complement, not replace, the value of their human-centric advice,” Ethridge said.

Vanguard’s Emotional and Time Value of Advice report earlier this year found that access to financial advice, whether through a professional or digital tool, leads to lower stress and greater confidence.

For example, 71 per cent of human-advised clients and 47 per cent of those receiving digital advice reported an increase in positive emotions, such as confidence and security, compared to when they were managing their own finances.

At the same time, 79 per cent of those seeing a human adviser and 57 per cent of digitally advised clients reported a decrease in negative emotions, and 86 per cent of respondents overall said they had greater peace of mind after accessing advice of either kind.

While there is potential to ease the advice gap through digital or hybrid advice tools research by Praemium and CoreData last month found that personalisation remains key to high-net-worth (HNW) client relationships.

Despite the possible efficiency gains, the study of 151 HNW advised investors found that more than a third (36 per cent) value trust as the single more important factor in their adviser relationship and 42 per cent said they preferred in-person meetings and want monthly communication with their adviser.

This suggests, according to Praemium, that clients still value high-touch service even if technology could make the advice process more efficient.