Robo-Advisor Penetration Low Among Older Investors; Lack of Knowledge & Track Record Major Barriers


In the October 2016 issue of the AAII Journal, Jaclyn McClellan updated her 2015 article on robo-advisors, discussing the current landscape and what robo-advisors offer individual investors. For those not familiar with robo-advisors, a robo-advisor is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. Even after being in the press so much these last few years, many investors still do not know what robo-advisors are or are weary of the services they provide. Furthermore, some of what has been written about robo-advisors have not painted them in a favorable light so many individuals who are aware of robo-advisors treat them with a bit of skepticism.

Weekly Reader Question

In light of Jackie’s recent article, we posed the following question to our readers last week:

Robo-advisers are digital advisory services that use computer algorithms to select stocks and other investments for people based on the information people provide about their risk tolerance and goals. How much have you heard or read about robo-advisers before now?

Here are the results:


Luckily, it seems that AAII has been doing a good job of keeping our members and readers informed of the robo-advising industry, as only 15% of respondents said they know nothing about robo-advisors. However, the largest segment of the 2,179 participants (41%) say they know only a little about robo-advisors.

Another 33% say they know a fair amount about investors, while 10% say they know a lot.

Based on these figures, it seems that advisory services are still facing a bit of an education gap with individual investors, especially among an older demographic that AAII members and readers tend to represent.

Weekly Special Question

For our weekly special question, we wanted to know what draws investor to or repels them from using robo-advisors. So we asked the following:

If you currently use a robo-adviser or are thinking of using one, why would you use a robo-adviser over investing yourself or using a human adviser? If you do not use a robo-adviser, what is the primary reason why you don’t?

In all, 343 readers responded to this question. Only 17 respondents (5%) said they are currently using a robo-advisor to manage some part of the investments. However, an even small number–3,2%–said they use a human financial advisor. Twenty-one percent (21%) said they prefer to invest on their own, the largest single response for the special question.

Another 14.3% said they do not currently use a robo-advisor because they do not understand the concept of robo-investing or know enough to invest with them. Some other barriers to robo-investing for some individual investors include:

  • Lack of human interaction/contact: 6.1%
  • Lack of an investment track record for robo-advisors: 5.8%

Among those who were considering using a robo-advisor, or already do, low costs (4.7% of all respondents) were the most attractive feature, followed by the “impartial” nature of robo-advisors (3.5%), whereby they remove emotion from the investment equation or do not have an ulterior motive for recommending certain investments.

Sampling of Responses

Here is a sampling of some of this week’s responses:

  • “A robo-adviser is software. Since it was coded by a person, by definition it is only one person’s opinion on investing. I like to perform a wide search for opinions and research when making up my own mind.”
  • “I belong to AAII so that I have the process to make my own decisions. Any advisor, real or robot, can only use the facts you already have. They can’t be your brains for you who know details you could never explain to them.”
  • “I do NOT use a robo-advisor because I believe Financial Planning and investing is more than quantitative answers to questions. I believe in taking into account QUALITATIVE input (such as nervousness of the investor, frailty, etc.) as well as quantitative input.”
  • “I like to have control over my investments. Robo-advisors are good for people who are financially unsophisticated or who are not good at selecting investments or are not interested in investing. It can be a reasonable alternative to overpaying for a human advisor. On the other hand, robo-advisors have not been tested in a market crash or even a bear market. In a crisis, robo-advisors are obviously not as good at hand-holding as a human advisor can be.”
  • “I have 45 years investing experience, robo-adviser can only view that experience it can’t use that experience to think ‘out of the box'”.
  • “I prefer to talk to a real person.”
  • “I question the reliability of robo-advisers. The history of markets shows that the majority sentiment is wrong more often than correct. Markets are auction markets and psychologically driven.”
  • “[A robo-advisor] would simply be a relatively low-cost method to generate new investing ideas. More importantly, it offers a low-cost method to compare and contrast with my own investment ideas to help ensure that I’m not totally off base or inadvertently overlooking some crucial aspect.
  • “At one time, I set up one of my wife’s accounts with a robo-adviser after she had a bad financial experience with a financial adviser. The robo-adviser did a much better job.”
  • “Another way for the government to keep track of my money. [Robo-advisors] are, in effect, RFID chips for our investments.”
  • “I don’t need the NSA managing my money. I do a pretty good job on my own. Anyone who thinks this isn’t part of some wider government plot to control the money of average Americans [sic] should stick their head in the sand.”

Want to weigh in? Participate in our weekly member poll, updated every Tuesday, and see the results online at


1 Reply to “Robo-Advisor Penetration Low Among Older Investors; Lack of Knowledge & Track Record Major Barriers”

  1. I’ve “tested the waters” with 2 robos, they’re still in infancy, but my biggest issue was their lack of current reporting, which would enable an investor to “tweak” their responses to risk tolerance questions. They don’t change your risk tolerance, other than insofar as to their format. I’m a very independent, long-term investor, but I see a place for the measured presence of robos.


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