A decade ago, people 50 or older were nearly nonexistent on social media. Today, about half of those ages 50 to 64 have been drawn in, presumably by cat memes and baby pictures like the rest of us.
Jon Stein, CEO of Betterment, hopes a similar story might be told of robo-advisers one day. These services, which manage investor portfolios via computer algorithms, have largely targeted — and attracted — millennials thus far. But Stein has reached out repeatedly to older age groups.
"In a sense, it's similar to how Facebook was seen as a platform for millennials to stay in touch after college, but in reality, today their audience is a much wider span," says Stein, who recently made headlines for calling baby boomers his company's "biggest opportunity."
He's in an uphill battle. In a February study from Allianz Life, only a quarter of baby boomers indicated some interest in working with an online adviser. Combined with Generation X, seven in 10 flat-out said they don't trust online financial advice. Those findings jibe with reality at many of these companies: Though Stein says 30 percent of Betterment's assets are from clients over 50, the average client age is just 36. At competitor Wealthfront, 90 percent of customers are under 50.
But the key service that robo-advisers provide — low-cost portfolio management — is valuable at any age, and reducing fees can make a significant difference in the things that matter most as retirement approaches: how much was saved and how long that money lasts.
Not for everyone
Let's be clear: This kind of relationship, if you can call it that, isn't a good fit for every investor. Most robo-advisers take humans out of the equation almost completely, save for customer service representatives and behind-the-scenes investment committees.
That means these advisers are generally not for people who have complicated financial situations, want comprehensive planning advice — covering, say, insurance and estate planning in addition to investment management — or need a real, live person to talk them off a ledge during a market rout or help guide them through decisions. A lot of baby boomers fall into the last bucket, which is one reason Wealthfront doesn't specifically target them as Betterment has, says Kate Wauck, a company spokeswoman.
"We know that the majority of this group still feels most comfortable sitting down with a person," she says.
Perks are many
Those willing to bend on some or all of the above will get a lot of what they'd receive from a human adviser at a fraction of the cost.
Many robo-advisers build, manage and rebalance portfolios for less than 0.50 percent of the client's assets, including the expense ratios of the investments used, typically low-cost exchange-traded funds. That's about half the cost of the typical financial adviser's management fee, which is charged on top of investment expenses.
Tax-loss harvesting, a practice that uses investment losses to offset capital gains in taxable accounts, is often included at an online adviser, as is retirement planning advice — albeit from a computer — and, with some services, distribution strategies for retirees. Baby boomers in or near retirement are steered toward an appropriate asset allocation for their goals; those who want to take more or less risk can adjust that recommendation.
Importantly, many of these services are fiduciaries, which means they're bound to keep their clients' best interests in mind. That's not the case for every investment adviser, though the Department of Labor's new fiduciary rule is set to change that in 2017 for advisers who have their hands in retirement assets, assuming it survives legal challenges.
A middle ground
If the idea of working exclusively with a computer doesn't feel natural — and that's reasonable — there are several services that pose a compromise, using computers to shoulder some of the burden but also offering clients access to financial advisers.
One such option is Personal Capital, the online adviser founded by former PayPal and Intuit CEO Bill Harris. The company has a base that skews older — an average age of 45 — likely in part because each client gets at least one dedicated adviser. (Personal Capital in general targets higher net worth investors)
Finally, don't be surprised if robo-technology works its way onto the computers of most financial advisers soon. Vanguard and Charles Schwab now have online-advisory arms that operate as human-computer hybrid services like Personal Capital. Fidelity, which is piloting its own online adviser, recently reported in a study that financial advisers who use technology have 40 percent more assets under management than those who don't, with 55 percent more clients.
Arielle O'Shea is a staff writer for NerdWallet, a personal finance website. E-mail: aoshea@nerdwallet.com.