Thanks Robinhood, but these traders now want professional help

Photographer: Gabby Jones / Bloomberg

The era of the coronavirus blockades helped provide a blistering increase in retail sales, and even many greens beat the market. But day traders also found that the year’s market swings required constant attention and their amateur trading resources were limited.

So many DIY investors have decided they need professional help.

Jeremy Johnson, a 31-year-old ad technology sales manager in Atlanta, began trading popular stock on Robinhood and depositing money into his individual Roth retirement account. But after investing an average of more than $ 15,000 a year himself, Johnson decided in November that it was time to turn to a financial adviser.

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

The pandemic fueled The increase in the number of day traders could be seen as a death knell for the financial planning and advisory industry. But the field continues are growing, as even day traders and those who prefer set-and-forget index fund investments have come to realize that there are many more components involved in wealth building.

Johnson’s new advisor, chosen based on a friend’s recommendation, helped package his life insurance with a mix of whole- and term-related features, strengthened his savings habits, and changed his retirement investments to improve their tax structure.

According to a study by Cerulli Associates October study, 40% of US investors surveyed said they needed more advice. Those who said they were willing to pay a financial professional were up to 56%, up 5 percentage points from 2019. And 82% of those who pay for financial advice said it is worth the price.

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

More confidence in relation to advisers

Given the current state of the economy, how confident are US stock market investors that they have the best possible strategy?

Franklin Templeton-Gallup Economics of Recovery Study, October 2020

After shares plummeted in March over fears of Covid-19, Los Angeles wealth management company decided Aspiriant LLC saw increased demand for its services. And a new batch of new clients arrived later in the year as a wave of IPOs hit the market, according to Sandi Bragar, the company’s chief executive of planning strategy and research. All told, 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 surprised by the $ 1,200 annual fee.

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

In the early years, Ware saw her advisor once or twice a year. But last year, after the pandemic, she realized how necessary it was to participate more often.

Eddie Welch, whose consulting firm was in Montgomery, Alabama bought by Captrust Financial Advisors said last year that every time there was financial turmoil, people were “more warm and receptive to paying for and receiving advice.”

Robinhood’s impact

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

The The growth of the retail trade on free apps prompted major brokerage firms to offer free trades as well, hoping to convince some of those customers to pay for advice. Many companies also added robo-advisors – software programs that use algorithms to mimic flesh-and-blood financial advisors.

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

Basically Schwab’s digital consulting tools Growing 18% year over year to $ 57.9 billion in 2020. This was part of the explosion of robo-advisers, with the number of users growing from 46 million in 2019 to 71 million, according to data collected by LearnBonds.com.

But most traders still want a personal touch. A Investopedia study of young adults with household incomes of $ 50,000 or more found that 56% trusted a financial advisor more than an automated one.

Phyllis Klein, who leads Captrust’s education and counseling programs, said that customers’ desire for insights grew sharply as the coronavirus pandemic wreaked havoc on society. “We’ve had nearly 12,000 webinar attendees, three times the previous year,” she said.

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