Thanks Robinhood, but these traders now want professional help

Photographer: Gabby Jones / Bloomberg

The era of coronavirus lockdowns helped are fueling a dramatic rise in retail, and many new recruits beat the market. But day traders also found that the year’s market fluctuations required constant attention and their hobbyist trading tools were limited.

So many DIY investors have decided they need professional help.

Jeremy Johnson, a 31-year-old ad tech sales manager in Atlanta, began trading popular stocks on Robinhood and making deposits to his Roth individual retirement account. But after investing more than $ 15,000 a year on average on his own, Johnson decided in November it was time to turn to a financial advisor.

“You can save your money as much as you want,” he said, “but if that doesn’t matter, what does it look like in the long run?”

The pandemic fueled the rise of day traders could have been seen as a death knell for the financial planning and advisory industry. But the field continues to grow, because even day traders and people who prefer investments in index funds to define and forget have realized that there are many more components involved in building wealth.

Johnson’s new advisor, chosen on the recommendation of a friend, helped bundle his life insurance with a mix of full and term features, bolstered his savings habits and changed his retirement investments to improve their structure fiscal.

According to research by Cerulli Associates October study, 40% of U.S. investors surveyed said they needed more advice. Those who said they were ready to pay a financial professional rose to 56%, up 5 percentage points from 2019. And 82% of those who pay for financial advice said that in was worth the price.

In fact, equity investors who had a financial advisor were more than twice as likely to say they are very confident they have the best investment strategy compared to those who go it alone, according to a Franklin Templeton and Gallup survey.

Increased trust associated with advisors

How confident are US stock investors that they have the best possible strategy given the current state of the economy?

Franklin Templeton-Gallup Economics of Recovery Study, October 2020

After stocks fell in March due to fears of Covid-19, the Los Angeles wealth management firm Aspiriant LLC has seen increased demand for its services. And another group of new clients arrived later in the year as a wave of initial public offerings hit the market, according to Sandi Bragar, general manager of planning and research strategy. In total, she said over the phone, the company’s customer list grew 32% in 2020.

When Tia Ware, a 30-year-old pharmacist in Virginia, first considered hiring a financial advisor five years ago, she was taken aback by the annual fee of $ 1,200.

“At first I was like ‘no’,” Ware said in a FaceTime interview. “But now, yes, when I see my accounts. If I didn’t have a financial advisor, I would only have shoes and bags to show. “

In the early years, Ware had seen his advisor once or twice a year. But last year, after the outbreak of the pandemic, she realized how imperative it was to engage more often.

Eddie Welch, whose Montgomery, Alabama-based consulting firm was acquired by Captrust Financial Advisors last year, said that whenever there has been financial upheaval, people “have been warmer and more receptive to paying and receiving advice.”

Robinhood’s impact

Welch, now a director at Captrust, said that while apps like Robinhood make it easier to trade stocks, “it’s a little more difficult to enter the market with a plan. And in most cases, I think that’s what people are looking for from us.

the The growth of retailing on free apps has prompted major brokerage firms to also offer toll-free transactions, in the hopes of convincing some of those clients to pay for advice. Many companies have also added robotic advisers – software that uses algorithms to mimic real financial advisers.

Charles Schwab Corp., which in October 2019 became the first of the majors to offer zero trading commissions, added 142,000 new accounts that month. This created “more of a pipeline for paid financial advice,” according to Morningstar analyst Michael Wong, who said many of those clients would likely be drawn to Schwab’s advice on the robot.

In fact, Schwab’s digital consulting assets grew 18% year-over-year to reach $ 57.9 billion in 2020. This was part of the explosion in the number of robotics advisors, with users rising to 71 million from 46 million in 2019, according to data compiled by LearnBonds.com.

But most traders still want a personal touch. An Investopedia survey of young adults with a household income of $ 50,000 or more found that 56% trusts a human financial advisor more than an automated advisor.

Phyllis Klein, who heads Captrust’s education and counseling programs, said customers’ desire for information is increasing sharply as the coronavirus pandemic wreaks havoc on society. “We had almost 12,000 webinar attendees and this is triple what it was the year before,” she said.

“I can’t stress how badly people need help,” Klein said, “and how badly they just want to talk to someone.”