Thanks, Robinhood, but these traders now want professional help

Photographer: Gabby Jones / Bloomberg

The age of coronavirus blockage helped fuels a strong growth of retail and even many beginners even beats the market. But day traders have also found that year-round market fluctuations require constant attention and that their amateur trading tools are limited.

So many DIY investors have decided that they need professional help.

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

“You can save everything you want,” he said, “but if you don’t do anything, what does it look like in the long run?”

Powered pandemic the rise among day traders could have been seen as a death knell for the financial planning and advisory industry. But the field continues to grow, since even day traders and people who prefer to invest in established and forgotten indexed funds have come to realize that there are many more components involved in wealth development.

Johnson’s new counselor, elected on the recommendation of a friend, helped secure his life with a combination of full-time and term-based positions, strengthened his savings habits, and changed his retirement investments to make ends meet. improve the fiscal structure.

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

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

Increased trust associated with counselors

How confident are American stock market 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 company Aspiriant LLC has seen a greater demand for its services. And another set of new customers arrived later in the year, as a wave of initial public offerings hit the market, according to Sandi Bragar, the company’s general manager for planning and research strategy. However, she said by telephone, the company’s customer list has grown by 32% in 2020.

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

“In the beginning I was like ‘hell not,'” 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 for him. ”

In his early years, Ware just saw his counselor once or twice a year. But last year, after the pandemic hit, he realized how imperative it was to get hired more often.

Eddie Welch, whose consulting firm is based in Montgomery, Alabama purchased by Captrust Financial councilors last year, he said that every time a financial riot took place, people “were warmer and more receptive to paying and receiving advice.”

The impact of Robinhood

Welch, now a director at Captrust, said that while apps like Robinhood make it easier to trade stocks, “it’s a little harder to get into the market with a plan. And, in most cases, I think that’s what our people are looking for. ”

The growth of retail with free applications has led large brokerage firms to offer tax-free transactions, in the hope of convincing some of these clients to pay for advice. Many companies have also added robo advisors – software programs that use algorithms to mimic meat and bone financial advisors.

Charles Schwab Corp., which in October 2019 became the first of the major companies to offer zero trading fees, added 142,000 new accounts in that month. This created “more of a pipeline for paid financial advice,” according to Morningstar analyst Michael Wong, who said many of these clients are likely to gravitate to Schwab’s robotic advice.

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

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

Phyllis Klein, who runs Captrust’s education and counseling programs, said customers’ desire to get information suddenly increased as the coronavirus pandemic wreaked havoc on society. “We had almost 12,000 participants in webinars and this is three times higher than the previous year,” she said.

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