This Study Says Millennials Aren’t Killing the Financial Adviser Industry
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Money… she’s not always easy.
Being a grown-up and keeping track of the (loads of) money you have coming in, the stuff you have to spend it on, and the places where you’re saving and growing it can get tough. That’s why people turn to financial advisers.
But millennials? Not so much. Only 46% of millennials said they use a financial adviser, according to a recent LendEDU survey.
And why would we? We’re so great at bucking the trends boomers and Gen X set, especially when those trends cost money. So it’s no surprise we’re reluctant to shell out cash for investment or financial advice — not to mention the time and effort necessary to communicate with someone on the phone or, gasp, go to their office.
That’s usually our M.O., right?
Alas, LendEDU says a measly 24% of millennials use robo-advisers to manage and invest their money.
Why Millennials Aren’t Using Robo-Advisers
Though we’re often painted as obsessed with the latest trends in everything from fashion to food and tech, it seems we’re much more hip to avocado toast and special shades of pink than to the technology that could make our financial lives easier.
Of those who don’t use the apps, 62% said it’s because they’ve never heard of a robo-adviser.
Maybe it’s a language issue. “Robo-adviser” sounds like something from a 1980s action flick, some monster from the future that came to terrorize a high school by giving everyone poor career counseling.
But the term just refers to apps that automate your investments, savings and money management.
Software does the work humans used to have to do, so they’re much cheaper to use. That makes financial advice more accessible to the likes of millennials — like ride-share apps make taxi service accessible to people in the middle of Iowa.
Some of Our Favorite Robo-Adviser & Money Management Apps
In case you’re in that majority of millennials who’ve never heard of robo-advisers, here are some examples:
- Blooom: This robo-adviser helps optimize and manage your 401(k). Cost: $10/month, but you can get a free account checkup before signing up.
- Betterment: Considered the pioneer of robo-investing, this app invests your money into a portfolio of low-cost index funds. You can start with a minimum $100. Cost: 0.25%/year
- Acorns: This app connects to your debit and credit cards and automatically rounds up your purchases, investing the spare digital change in a simple portfolio based on your risk tolerance. You can use the account to automate your savings and withdraw anytime. Cost: $1 + 0.5%/month (no fee for a zero-balance account)
- Stash: Choose a portfolio based on your beliefs and interests. It’ll pull an amount you set from your bank account at regular intervals, and you can start with as little as $5. Plus, you’ll get a $5 bonus when you sign up through this link. Cost: $1/month (first month free)
- Clarity Money: This app connects to your bank account and cards to give you a visual representation of your spending and income. It also shows your recurring charges you could cancel and will negotiate your bills down for you. Cost: free
- Credit Sesame: This free app and service shows you your credit score and credit report, plus suggests steps you can take to improve your score. Cost: free
Millennials Don’t Trust Robo-Advisers
Ignorance isn’t the whole picture. Plenty of millennials have heard of robo-advisers but still aren’t using them. Why?
We don’t seem to trust the software with our money just yet.
Millennials are slightly more inclined to believe robo-advisers will make a mistake compared with humans — 52% versus 48%, respectively, according to the LendEDU survey.
Worse, we apparently worry the software can’t keep track of our funds. A majority, 62%, think a robo-adviser is more likely than a human to lose their money.
On the flip side, we think human advisers are more effective — 69% told LendEDU they believe human advisers will get a better return on their investment than robo-advisers.
That last point might be true, depending on how you want to invest your money, but… fees, phone calls, offices, human contact. Please.
Here are a few things real millennials have said about their experiences with robo-adviser apps:
Jamie Cattanach set up Stash to automatically pull $5 a week from her bank account to invest and build her emergency fund. “I was thrilled to find a way to finally start investing, and then automate it so I didn’t have to think about it,” she says.
CJ Reid manually rounds up her purchases with Acorns, accepting round ups of less than 50 cents, “like my $3.60 cup of coffee.”
“Rounding up 40 cents here and 25 cents there moves me swiftly enough to $5 so that I can begin investing without putting myself into the red,” she says.
Carson Kohler set up Clarity Money to hold herself accountable to her budget and goals.
“By simply analyzing and keeping tabs on my spending habits with Clarity Money, I’m reminded of my larger financial goals,” she says.
Ready to Test the Waters With Robo-Advisers?
You don’t want to be left in the dust. Fluff your cloud eggs, slip into your romper and download a few money-management apps.
If you haven’t found one that fits your needs here, try these seven apps The Penny Hoarder staffers actually use to tie down that dame we call money.
Dana Sitar ([email protected]) is a senior writer/newsletter editor at The Penny Hoarder. Say hi and tell her a good joke on Twitter @danasitar.