Like many emergent technology-based consumer products and services, adoption is often assumed to lean towards younger generations. In the case of the delivery of online financial advice – which often falls under the robo-advice moniker – similar observations can be made about assumptions concerning generational product adoption rates and, in parallel, the budding reality of actual consumer adoption. While many emergent wealth management services have targeted accumulators and the millennial generation, robo-advice and the broader delivery of financial services online is certainly more than a millennial story.

Millennials as a Robo-Advice Target Client Segment

On paper, the millennial age cohort reflects many attractive attributes to be a target for emerging online advice services. From a timing perspective, the first-born of the generation are beginning to reach the age typical of entering the accumulation phase of the financial life cycle. This is the phase where incomes stabilize, families are started, homes are purchased and wealth begins to accumulate as human capital is transformed into financial wealth. This is also the phase where financial advice relationships form, as potential clients accumulate enough assets to garner the attention of, and meet the minimum asset thresholds for, more traditional wealth management practices.

The millennial generation also presents an eye-catching opportunity from a household market size perspective. Differing on a country-by-country basis, the sheer size of the millennial generation rivals the baby boomer cohort as the largest living generation in developed markets.

In addition, and perhaps the most attractive quality of them all, millennials have developed a reputation for being tech-savvy and relatively early adopters of emergent consumer technologies. These combined factors have made this age segment a key target for various robo-advice services, and in many cases these firms have succeeded in onboarding a relatively young customer base.

Unfortunately, younger generations lack a major ingredient which is fundamental to being an attractive wealth management client: the time required to accumulate assets. While younger age segments may be more open to adopting new technology-based services and represent a large market when measured from a population or lifetime value perspective, in the wealth management arena the cohort represents a relatively small opportunity in the short term when measured in terms of their total investable assets.

Early Adopters and Baby Boomers: Certainly Not Mutually Exclusive

While the millennial generation has early adopter tendencies when it comes to digital services, market realities show that other generations have also demonstrated similar tendencies. So much so that, through a North American lens, despite making up a large portion of the client base, millennials represent a minority of robo-advice assets under administration. Generation-Xers, baby boomers and beyond make up a significant portion of the present-day online advice asset base and represent a relatively lucrative target going forward. In fact, looking at the Canadian experience, the average age of an investor using robo-advice services is in their mid-40s, ranging from teenagers to people in their 90s.

For wealth management distributors whose revenues are linked to assets under administration, it is these generations that have had more time to accumulate assets that offer a larger potential market. This is especially true in the near term, as gen-Xers and baby boomers stand to benefit from an intergenerational transfer of wealth more so than their millennial counterparts.

Outside of segmenting the market by age, client preferences offer some hints as to where online advice efforts may potentially bear the most fruit. The preference for digital interaction (as opposed to face-to-face meetings) is not exclusive to one generation, and not all consumers align with their demographic stereotypes. As time passes, older demographic segments are becoming increasingly comfortable in their use of technology. There are retired individuals who prefer completely digital financial advice delivery, just as there are some millennials who would prefer to deal with someone strictly face-to-face. The preference for mode of delivery exists on a continuum, one that is dynamic and subject to shift over time. Proxies from other digitizing industries, however, would suggest that the scale is tipping towards the digital end of the spectrum.

Another client preference continuum to consider when assessing the market potential for online advice offerings is the degree of autonomy a client prefers in dealing with their financial matters, ranging from completely self-directed to delegating all decision making to a professional advisor.

It is the combination of reaching the accumulation life cycle stage, a preference for digital interaction and the inclination to delegate that represents a potential sweet spot for online advice firms.

Online Advice Has a Value Proposition Relevant for Older Generations

Beyond the generations who are approaching the traditional age of retirement, the extension of online advice adoption up the demographic age spectrum holds potential with the retiree market as well. Although many households in this cohort have long-entrenched financial advice relationships, delivering advice through an online interface offers certain advantages that align with the needs of older client segments.

A significant theme behind the broad expansion of FinTech has been the proliferation of services based on the idea of simplifying the complex, and making navigation easy and straightforward. Accordingly, online advice does not require a high degree of tech-savviness, but rather requires a certain degree of digital literacy and comfort operating online. Simple user interfaces that have considered ease of navigability in their design can be comprehended by those with basic levels of digital literacy.

In addition, service accessibility has been a common element and advertised differentiator of many robo-advice offerings to date. The ease of access, whether that is access to a remote financial advisor, customer support, educational resources or even simple account information, has value to clients where physical mobility is a limitation.

Online services also provide an interface and environment that is potentially collaborative, supporting collaboration not just between the robo-advice firm and the client, but between the client and their family members where permissioned access or household account linkages can be facilitated digitally.

There have also been examples of robo-advice firms building products specifically aimed at the retiree market. These product features range from income-oriented portfolios targeting specific monthly income levels to extending access to dedicated financial advisors with specific expertise in retirement considerations.

Of course, servicing older age segments with an online advice offering comes with its challenges. The complexity of a typical client’s financial considerations tends to increase as they age, which may be difficult to address through a purely digital offering. As well, many clients may have existing advice relationships, exhibiting a degree of inertia with their existing providers which is difficult to break. Generating a broader awareness of robo-advice among the public, and a sense of trust in what is still a relatively nascent service offering, also presents a more expansive set of challenges.

The Road Ahead Provides Services Across the Demographic Spectrum

From a product development perspective, building on what is already available in online advice delivery channels allows for potential new avenues of value creation specific to older generational age segments.

Advancements in related healthcare technologies offer some potential integration opportunities, an example of which would include the ability to test for cognitive decline in aging clients using an integrated technology-based solution. Elements of estate planning are also gravitating online, allowing those planning for the future to create, file and store materials in a digital vault with familiar elements of accessibility and simplicity built into the value proposition. Several firms are also working on solutions to take on the problem of financial exploitation of older clients by monitoring bank and investment accounts for suspicious activity and alerting designated family members or friends when triggered.

Most of the activity and innovation on this front has taken place in the start-up community, where it is a safe bet that entrepreneurs will continue to seek out problems to solve, online advice models will continue to evolve and robo-advice’s relevance to the retiree cohort will continue to grow.

While many emergent wealth management services have targeted millennials and have developed valuable solutions for savers and accumulators, robo-advice and WealthTech certainly have broader applications across the demographic spectrum.