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The majority of US investors would choose a trading account which is a hybrid of digital guidance and human support over accounts managed solely by either a human professional or an algorithmic system, according to a study conducted by E-Trade Financial Corp. (NASDAQ:ETFC) and published on Thursday. Even if they have to pay somewhat higher price for mixed type accounts, half of investors would still chose them.
The data is based on E-Trade’s latest StreetWise Experienced Investor Tracking Study published at the beginning of each quarter. The respondents are divided into thirds of active (trade more than once a week), swing (trade less than once a week but more than once a month), and passive (trade less than once a month) investors.
The survey was conducted online in the 6-11 January, 2016, and covers the responses of more than 919 experienced investors located in the US, whose accounts have a balance of at least $10,000. Respondents, which were evenly distributed across brokerages, age, and geographic regions, consisted of 65% men and 35% women.
Respondents were given the opportunity to choose between three types of trading accounts – a digital-only solution managed entirely by an algorithm at a lower cost, a professional advisor-driven account at a higher cost, or a moderately priced hybrid between the two other types.
While responses varied in the different age groups, overall 50% of them said they prefer a digital hybrid account. A total of 27% of the surveyed said they prefer to use accounts that a managed entirely by a human professional, while the remaining 23% said they prefer an entirely automated account. More details about investors’ responses follow:
“The data suggest a new paradigm in robo-advisory models: adaptive solutions backed by human support,” said Kunal Vaed, SVP of Digital Channels at E*TRADE Financial. “The idea that younger investors will only gravitate towards the cheapest solution is a myth. While intuitive and insightful digital tools are a necessity in catering to today’s investors, at the same time, investors seek human guidance. Investors want to be able to talk to a professional, especially during extreme market volatility.”
Digitalization has been spreading in all economy sectors, broking included. Robo-based trading solutions are popular due to their automated processes and lower cost. However, investors still seek human guidance and support and are willing to pay more to get it.
New York-based E-Trade Financial Corp offers under the E-Trade brand various financial, online brokerage and banking services. It works primarily with retail clients through 30 offices across the US.
The holding company has three subsidiaries – E-Trade Securities for securities products and services, including stocks, bonds mutual funds, options, and ETFs; E-Trade Capital Management for managed account solutions; and E-Trade Bank for bank products and services.
Source: E-Trade Financial