Thanks, Robinhood, but these traders now want professional help

Photographer: Gabby Jones / Bloomberg

The era of coronavirus blocks helped fuels a dramatic increase in retail trade, and many newbies even beat the market. But day traders also found that fluctuations in the market for the year required constant attention and that their amateur trading tools were limited.

Many do-it-yourself investors have decided that they need professional help.

Jeremy Johnson, a 31-year-old advertising technology sales manager in Atlanta, started out by trading popular shares in Robinhood and making deposits into his individual Roth retirement account. But after investing more than $ 15,000 a year alone on average, Johnson in November decided it was time to turn to a financial advisor.

“You can save as much as you want,” he said, “but if you’re not doing anything, what will it be like in the long run?”

The pandemic The increase in the ranks of day traders could be seen as a coup de grace for the financial planning and consulting industry. But the field continues to grow, as 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 based on a friend’s recommendation, helped to package his life insurance with a combination of features based on all and term, strengthened his savings habits and changed his retirement investments to improve his tax structure .

According to a survey by Cerulli Associates October study, 40% of American investors surveyed said they need more advice. Those who said they were willing to pay a financial professional rose to 56%, 5 percentage points above 2019. And 82% of those who are paying for financial advice said it was worth the price.

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

Greater confidence associated with consultants

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

Franklin Templeton-Gallup Recovery Economics Study, October 2020

After stocks plummeted in March due to fears at Covid-19, Los Angeles’ wealth management firm Aspiriant LLC saw greater demand for its services. And another set of new customers arrived at the end of the year, when a wave of initial public offerings hit the market, according to Sandi Bragar, the company’s managing director for strategy planning and research. In all, she said by phone, the company’s customer list grew by 32% in 2020.

When Tia Ware, a 30-year-old pharmacist from Virginia, first thought about hiring a financial advisor five years ago, she was surprised by the $ 1,200 annual fee.

“At first I was like ‘hell, no’,” said Ware 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 only saw his advisor once or twice a year. But last year, after the pandemic struck, she realized how necessary it was to get involved more often.

Eddie Welch, whose Montgomery, Alabama based consulting firm was purchased by Captrust Financial Advisers last year, he said that whenever there was financial turmoil, people “have been more warm and receptive to paying and receiving advice”.

Robinhood’s impact

Welch, now director of Captrust, said that while applications like Robinhood make it easier to trade shares, “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. “

O The growth of retail trade in free apps has meant that major brokerage firms also offer free deals, hoping to convince some of these clients to pay for consultancy. Many companies have also added robot consultants – software programs that use algorithms to mimic flesh-and-blood financial consultants.

Charles Schwab Corp., which in October 2019 became the first of the big companies to offer zero commercial commissions, added 142,000 new accounts that month. This created “yet another paid financial advisory pipeline,” according to Morningstar analyst Michael Wong, who said that many of these clients would likely gravitate towards Schwab’s robotic consultancy.

In fact, Schwab’s digital consulting assets grew 18% year on year, to $ 57.9 billion in 2020. This was part of the explosion of robo consultants, with users increasing from 46 million to 71 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 family income of $ 50,000 or more revealed that 56% he trusted a human financial advisor more than an automated one.

Phyllis Klein, who leads Captrust’s education and counseling programs, said customers’ desire for information was growing dramatically as the coronavirus pandemic wreaked havoc on society. “We had almost 12,000 participants in the webinar and that’s three times as much as in the previous year,” she said.

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