If you search “investing apps” in your phone’s Play Store, the search results will include: Robinhood, Acorns, Stash, and Betterment. You’ll also see the big names like Fidelity, Schwab, TDAmeritrade, and ETrade mixed in there.
So, why are 80% of Millennials still not investing?(1)
- They’re misled into thinking DIY investing as a hobby when in reality, it’s extremely time consuming. This means apps like Robinhood and websites like ETrade and ThinkorSwim are really only useful to the self-investor. But, what about the fact that 34% of Millennials report they don’t know how to invest?(2)
- Sure, robo-advisors will invest your money for you, but consumers have been reported to prefer a combination of human and technological guidance. Especially, during troubled times. Although inexpensive, financial markets have been known to be too chaotic for machine learning(3). In fact, machine-learning in investments has definitely not been as successful as it has been in purely data-driven industries. Investing with a robo-advisor also means you’re depending on an old-school investment philosophy based on diversifying risk. This philosophy wouldn’t have protected your money during the giant selloff that was the Internet Bubble (2001-02) and Subprime Mortgage Crisis (2007-08). In a Bull Market, everybody makes money. The true value-added comes in not only growing your money, but also protecting it.
- When we refer to hybrid advisers we mean robo-advisors who offer customer service on an as-needed basis. Specifically, Schwab, Ellevest, Vanguard, TDAmeritrade, and Fidelity, to name a few. In addition to the problems with robo-advisors mentioned in #2, these advisors have substantial conflicts of interest. Associates at these firms win bonuses to push higher-priced products to clients(4). This sounds like Wall Street ethics to me. Considering 86% of Millennials don’t trust Wall Street, it’s no surprise these hybrid services aren’t cutting it either(5).