Data & Research November 5, 2018

Majority of Americans Expect to Use a Robo Adviser

Nearly half of adults surveyed by Charles Schwab think that robo advice is the technology that will have the biggest impact on financial services.

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Fifty-eight percent of Americans expect to use a robo adviser by 2025, Charles Schwab learned in a survey, summarized in its report, “The Rise of the Robo: Americans’ Perspectives and Predictions on the Use of Digital Advice.” In addition, 45% say robo advice will be the technology that will have the biggest impact on financial services.

In addition, by the year 2025, 57% expect to use robotics, 55% artificial intelligence, 54% virtual reality, 53% big data, 43% augmented reality, 36% blockchain and 36% cryptocurrency.

However, when it comes to financial advice, people still want the human touch, with 71% of people wanting a robo adviser that also gives them access to human advice. Among Millennials, this jumps to 79%. This is true for 73% of Gen Xers and 64% of Baby Boomers.

Forty-six percent of Baby Boomers using a robo adviser say it is perfect for their life stage, and 45% of this demographic group expect to use a robo adviser by 2025.

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Asked what they see as the benefits of using a robo adviser, 67% said it is taking the emotion out of investing, 65% said it is automatic rebalancing, and 60% said it is developing a diversified portfolio.

Sixty percent of current robo advice users are Millennials, and nearly one-quarter are Gen Xers. Current robo advice users are two times more likely to say it makes managing their investments extremely easy.

Edelman Intelligence conducted the online survey among  1,391 adults in July.

Data & Research November 5, 2018

Fidelity Analysis Shows Advantage of Long-Term Savings

In the past 10 years, the average 401(k) balance has grown 87%, from $56,900 in the third quarter of 2008, Fidelity Investments reports.

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The average 401(k) balance reached an all-time high of $106,500 in the third quarter, according to Fidelity Investments. This surpasses the previous high of $104,300 in the fourth quarter of 2004 and is a 87% increase from a decade ago, when the average 401(k) balance was $56,900.

The average individual retirement account (IRA) balance reached $111,000, a 4% increase from the third quarter and more than double the average of $52,000 a decade ago. The average 403(b) balance also reached a record high of $85,500, nearly double what it was a decade ago ($43,300).

The number of people with $1 million or more in their 401(k) reached 187,000 at the end of the third quarter, a 41% increase from a year ago, when they totaled 133,000 and nearly 10 times the 19,300 401(k) millionaires 10 years ago.

The average contribution rate reached 8.7%, the highest since the fourth quarter of 2006. Women contributed an average of 8.5%, a record high, and 32% of female 401(k) investors increased their contribution rate over the past year, compared to only 14% who did so a year ago. IRA contributions among female Millennials also increased, by 19%.

Half of 401(k) accounts (50.4%) now hold 100% of their assets in a target-date fund (TDF). Thirty percent of all 401(k) assets are in TDFs, a significant increase from 9.8% a year ago. Fifty-one percent of all new 401(k) assets go to TDFs. Among 403(b) savers, 62% are invested in a TDF.

Among 401(k) savers who have consistently been in their plan for five, 10 or 15 years, the average balance among Millennials is $80,000. Among all workers who have participated in their plan for five consecutive years, the average balance is $221,200, more than double the average of $103,700 five years ago. Among Millennials in this category, the average balance reached $82,000, four times the average balance of $20,600 five years ago.

Among those who have participated in their plans for 10 years, the average balance reached $305,400, nearly five times the average balance of $65,700 10 years ago.

For those who have been in their plan for 15 years, the average balance reached $400,300, more than eight times the average balance of $47,800 15 years ago.

“One of the few positive outcomes from the financial crisis was that it caused individuals to take a closer look at their retirement accounts and educate themselves on some of the positive steps they should take to help protect and grow their investment savings,” says Kevin Barry, president of workplace investing at Fidelity Investments. “Combined with some of the plan design benefits of the Pension Protection Act, we’ve seen an increasing amount of positive savings behavior over the last 10 years. Most individuals will go through several periods of market volatility in their savings career, so it’s important to stay the course.”

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