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Robo-Advisors Aren't Your Father's Financial Advisor

Posted by Lori Vellucci

Tue, Dec 12, 2017

Back in the day, if you had a little money to invest, you called up the brokerage firm that your dad used, you talked to his“guy” and you asked him to invest your money for you. Those days aren’t totally gone, but over the last few years new technology has disrupted the traditional investor-client relationship—resulting in more ways than ever to invest your money yourself.

We all remember the iconic E*TRADE baby from way back in 2013. E*TRADE’s campaign brought the online discount stock brokerage firm for self-directed investors model into the mainstream. Since then, more DIY investment platforms have cropped up, each vying for the modern self-directed investor’s business. But one important learning from the DIY trend of the past decade is that even though this model lends itself to independent investing, DIY-investors still need some type of investment help.

Robo-advisors: The rise of AI in finance

The first robo-advisor was released in 2008 to help these new investors make smart money choices. For the most part, early DIY investors didn’t have a formal finance background, so robo-advisors offered them portfolio management services and insights that were once reserved for high-net-worth individuals—at a fraction of what a traditional human financial advisor might charge. It was a gamechanger.

Robo-advisor technology continues to shape the financial services industry with big players like Charles Schwab and Ameritrade each launching their own in the last few years. This growing interest and investment in robo-advisory technology is great for DIY investors and offers a ton of opportunity for traditional financial firms be on the cutting edge of FinTech.

Given the changing landscape, we wanted a better understanding of investor perceptions of robo-advisor clients.  Through our 2017 Consumer Pulse, we surveyed 2,000 US adults about FinTech, traditional financial services firms, and who they perceived as the technologies' typical user.

Who's using robo-advisors?

Typical Robo-Advisor User.png

CMB’s AffinID (a measure of social identity’s influence on consumers) score for this FinTech offering indicate that while all three components of AffinID (clarity, relatability, and social desirability) could stand improvement within the investor community. Relatively speaking, relatability is weakest--people have a clear image of what the typical robo-advisor user is like and that image is socially desirable, but they don't view the typical user as part of their "tribe".

The inability of investors to relate to their image of the typical robo-advisor user sheds light on a potential roadblock. Robo-service providers targeting traditional investors might consider messaging that conveys a typical user more closely aligned with the “traditional investor image”.

What emotions are driving use?

We found that robo-advisor users themselves are driven by feelings of being smart, wise, and savvyefficient, practical, productive.  Inspiration and motivation are also key emotional drivers for robo-advisor services.

Emotions that drive robo-advisor usage2.png

Why does this matter? It tells us what brands looking to differentiate themselves in a crowded FinTech market could be doing to attract more customers. These emotional drivers could be important messaging elements for those companies looking to court new money from traditional investors.

Are robo-advisors the next "big thing" in FinTech?

FinTech adoption curve2.png

Three quarters of robo-advisor users consider themselves early adopters, this is in contrast with users of mobile wallet and online-only banking--two technologies that have entered the mainstream. As traditional financial service providers make considerable investments in driving robo-advisor adoption, our findings show that to drive adoption it's critical to understand both how consumers want to feel, and how they perceive and relate to their image of the typical user.

Interested in learning more?

Our comprehensive FinTech study also looked at online-only investment apps, online-only banking, and mobile wallets. Download a sneak peek of our findings from all four in our Facing the FinTech Future series:

Topics: Artificial Intelligence, financial services research, Identity, AffinID, BrandFx

New Study: Busting Millennial Banking Myths

Posted by Megan McManaman

Thu, Mar 03, 2016

Why does MasterCard want to replace your password with a selfie? How did Venmo become a verb? Why did JPMorgan Chase's CEO fret about Silicon Valley's start-ups to investors last year? Part of the answer lies within the attitudes and needs of that much talked about generation. . .Millennials. As part of our self-funded Consumer Pulse research, CMB partnered with leading venture capital firm Foundation Capital to explore how and why Millennials are helping redefine the banking industry

In this new report, insights include:

  • Millennials are not a homogenous group. We conducted a segmentation of Millennials, revealing five distinct personas with varied brand preferences, attitudes, and behaviors 
  • Most Millennials still use traditional financial products and services. Just over a third of Ambitious Adopters and Financial Futurists—the most forward-looking of the segments—say they’re most open to non-traditional financial services. 
  • Millennials place considerable importance on finance apps and tools. Asked which apps and tools they could not live without, Millennials mention financial tools and apps at the same rate as apps used for texting and messaging.

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 Download the full report here!

Topics: infographic, financial services research, millennials, Consumer Pulse, market strategy and segmentation

Millennial Women and Planning for the Future

Posted by Lori Vellucci

Wed, Jan 27, 2016

Millennials_investing.jpgMy first real job came with an important-sounding title (Project Director) and all the things grown-ups look for in a position, such as health insurance and a 401K. I was 22 and didn’t know anything about retirement plans; retirement itself seemed to be in the infinite distance. My dad told me, “It’s free money. You can’t turn it down,” so I dutifully enrolled in the company’s program. When I left that job for a bigger title and a better salary, I promptly liquidated my 401K and took the cash. Retirement still seemed really far away and besides, even with my important sounding title, the salary hadn’t been nearly as impressive. Receiving a paycheck just once a month had left me with a lot of credit card debt, and I thought paying that down might be a better use for the money I had painfully put into a 401K each month over the previous several years. 

Since that first step on the career ladder, I’ve enrolled in other retirement plans with other employers, opened a SEP when I worked for myself, and acquired other investment vehicles over the years. Even so, based on many articles I have read, I will likely never make up for not contributing and staying invested in those first early years. 

CMB recently conducted a thought-provoking, nationally representative study on Millennials and money, and I wondered what young women today are doing and if they’re smarter about retirement and investing than I was at 22.

According to our study, overall, women ages 21-30 are driven, idealistic, and interested in furthering their education—more so than their male counterparts.

table1.jpg

Many are confident that if they budget and plan well enough, they will be shielded from financial setback. Further, a plurality feel they will reach their long-term financial goals and the majority plan to have more than just their employer-sponsored retirement plan when it comes time to retire. Most of these young women feel confident that they are saving enough for their future! So far, so good.

Millennials_Investing2.jpg

But wait—nearly twice as many young women don’t feel confident making their own investing decisions compared to men, and more than four in ten feel they would invest more if they understood it better.

table3.jpg

While young men and women participate in an employee sponsored retirement plan at about the same rate, women are significantly less likely to own mutual funds, individual stocks, and to have their own brokerage account.

table4.jpg

Certainly, there has been a great deal of reporting on women’s reluctance to discuss financing and investing. Women often indicate feeling less confident in their knowledge, even as they tend to have lower risk portfolios, which perform just as well as those of male investors.

Traditional financial services investment firms have made efforts to tailor content and offerings to younger women, and websites like GoGirlFinance have also sprung up to fill a real void. But are these new sites reaching young women in a compelling and meaningful way? 

As co-author of our Millennials and Money study and partner at Foundation Capital, Rodolfo Gonzalez notes: “The financial services industry is at a critical juncture. We are seeing a lot of companies emerge to address the financial needs and expectations of the Millennial audience. The Millennial consumer expects a mobile, on-demand, simple, and useful user experience as they are the first digital natives. In the future, we can expect to see start-ups emerge to focus specifically on women and financial services.”

Even so, are they reaching young women in a compelling and meaningful way? A very good question.  Not wanting to rely just on our statistically meaningful, nationally representative study, I conducted an office poll...

They feel unprepared to invest on their own:

 “Not confident in my knowledge about investments; seems like a risk.”

“I have thought about trying it, but I feel uneducated on what would be a good investment. I would like to try to dive into investing on my own and experimenting with a small amount of money in the next few years.”

 “I am not at all confident in investing on my own. It is very foreign to me, so (although I feel like I probably should be) I just don’t do it.”

Further, closer-in priorities tended to over-shadow investing and saving for retirement:

“I am most focused on saving for my wedding and a house down the line.”

 “College debt is a huge one, I graduated with over $80,000 in debt, so that’s a huge hindrance to reaching some of my financial goals.”

“In addition to college debt, there’s my car payments, saving to buy a house/condo, and getting married in the next few years.”

 “My college debt is a concern, but mostly I just focus on my day to day expenses (rent, activities, and food). In my mind, any savings I have are designated for travel.”

Many of the young women in the office combine traditional banks with online tools like Mint or Personal Capital to manage their finances:

 “Currently I mainly manage my finances on a pen and paper ledger #oldchool but I check my accounts daily – Bank of America, Citizens, Capital One—and I log on to all loan platforms multiple times a month. I have used Mint before.”

“I use the app Mint to keep track of my finances. I also use apps for each savings/checking account I have (Bank of America, Charles Schwab, USAA) that I monitor.”

“Mint.com is great for monitoring all my accounts at once since it all pipes in, but not for budgeting. I just use Excel to actually manage my finances.”

While these women certainly have dreams of retirement in the abstract, for many it still feels very far away:

“Retirement is so far away for me right now—I just let my contributions go into my account automatically and hope that what I’m doing now will be enough and will be worth it when retirement time comes.”

 “What I’m contributing right now feels like it should be enough, but how can I know what will happen in the next ~50 years?”

“I wish I was more involved with my retirement and could a higher percentage of my paycheck, but I know I’ll have that chance down the line, so I’m not worried right now.”

It’s clear financial service providers, both traditional banks and start-ups, have a lot of work to do to educate, motivate, and inspire young women investors. 

Want to learn more about Millennials’ financial needs and expectations as well as what that means for your industry?

Watch here!

Lori Vellucci is an Account Director at CMB.  She spends her free time purchasing ill-fated penny stocks and learning about mobile payment solutions from her Gen Z daughters.

Topics: financial services research, millennials, Consumer Pulse, webinar

Busting Millennial Money Myths at Money 20/20

Posted by Megan McManaman

Thu, Oct 22, 2015

money2020.pngEvery day there’s a new report about Millennials—they’re in debt/they’re saving for retirement, they’re mobile/they’re going off the grid, they’re hard workers/they’re too entitled to succeed—the list goes on. Brands are desperate to learn what makes this generation tick, but the current research lacks actionable insights for the marketers trying to serve them.

To dig deeper, we partnered with venture capital firm Foundation Capital to clear through the clutter and to learn what Millennials are doing and thinking about when it comes to their money. Through our Consumer Pulse research program, we surveyed 1,055 Millennials about their tech use and financial habits, and we included three “deep-dive” sections covering attitudes and preferences towards banking, investments, and insurance.

On October 26thCMB’s Lori Vellucci will join Foundation Capital’s Charles Moldow at the Money 20/20 conference in Las Vegas to unveil new insights into the needs, perceptions, attitudes, and actions of Millennials. They’ll take a look at the very different needs within this most talked about generation, the coming disruption, and the wave of innovation required to address their financial needs.

If you can’t make it to the conference, don’t worry! We’ll be sharing takeaways from our research in November.

For the latest Consumer Pulse reports, case studies, and conference news, subscribe to our monthly eZine.

Subscribe Here 

Topics: financial services research, millennials, Consumer Pulse, conference recap

When Only a #Selfie Stands Between You and Those New Shoes

Posted by Stephanie Kimball

Thu, Aug 13, 2015

mobile, shopping, mobile walletThe next time you opt to skip the lines at the mall and do some online shopping from your couch, you may still have to show your face. . .sort of. MasterCard is experimenting with a new program that will require you to hold up your phone and snap a selfie to confirm a purchase.  MasterCard will be piloting the new app with 500 customers who will pay for items simply by looking at their phones and blinking once to take a selfie. The blink is another feature that ensures security by preventing someone from simply showing the app a picture of your face in an attempt to make a purchase.

As we all know, passwords are easily forgotten or even stolen. So, MasterCard is capitalizing on technology like biometrics and fingerprints to help their customers be more secure and efficient. While security remains a top barrier to mobile wallet usage, concern about security is diminishing among non-users. In addition to snapping a selfie, the MasterCard app also gives users the option to use a fingerprint scan. Worried that your fingerprints and glamour shots will be spread across the web? MasterCard doesn't actually get a picture of your face or finger. All fingerprint scans create a code that stays on your phone, and the facial scan maps out your face, converts it to 0s and 1s, and securely transmits it to MasterCard.

According to our recent Consumer Pulse Report, The Mobile Wallet – Today and Tomorrow, 2015 marks the year when mobile payments will take off. Familiarity and usage have doubled since 2013—15% have used a mobile wallet in the past 6 months and an additional 22% are likely to adopt in the coming 6 months. Familiarity and comfort with online payments has translated into high awareness and satisfaction for a number of providers, and MasterCard wants a slice of that pie. Among mobile wallet users, over a quarter would switch merchants based on mobile payment capabilities.

mobile wallet, wearables

Clearly the mobile wallet revolution is well underway, but the winning providers are far from decided, and MasterCard is taking huge leaps to see how far they can take the technology available. If MasterCard can successfully test and rollout these new features and deliver a product that their customers are comfortable using, they can capture some of the mobile wallet share from other brands like Apple Pay and PayPal.

So what’s next? Ajay Bhalla, President of Enterprise Safety and Security at MasterCard, is also experimenting with voice recognition, so you would only need to speak to approve a purchase. And don’t forget about wearables! While still in the early stages of adoption, wearables have the potential to drive mobile wallet use—particularly at the point of sale—which is why MasterCard is working with a Canadian firm, Nymi, to develop technology that will approve transactions by recognizing your heartbeat.

Since technology is constantly adapting and evolving, the options for mobile payments are limitless. We've heard the drumbeat of the mobile wallet revolution for years, but will 2015 be the turning point? All signs point to yes.

Want to learn more about our recent Consumer Pulse Report, The Mobile Wallet – Today and Tomorrow? Watch our webinar!

Watch Here!

Stephanie is CMB’s Senior Marketing Manager. She owns a selfie stick and isn’t afraid to use it. Follow her on Twitter: @SKBalls

Topics: technology research, financial services research, mobile, Consumer Pulse, retail research