Self-directed investors are not nearly as self-directed as they think they are.
Rather than relying entirely on themselves, do-it-yourself investors are consulting more sources of investment information and advice, including real live advisors, a new study from research firm Hearts & Wallets has found.
According to the research, investors consult an average of 6.8 sources, up from 5.5 in 2012. The largest increase was in the use of financial professionals as well financial portals and other online sources of information.
In 2014, 45% of investors said they hired someone to provide financial advice, up from 37% who hired advisors two years before. The use of indirectly paid financial professionals, such as life insurance providers and mutual fund and online brokers whose fees are bundled into product costs, also increased during this period, according to the study.
Investors also registered an equal upswing in the use of online content, such as financial blogs and websites. In 2014, nearly half (46%) used online sources, up from 38% in 2012.
"Investors want to control their financial decisions, and smart consumers double- or triple-check sources of advice and information in addition to themselves," Chris Brown, partner and co-founder of Hearts & Wallets, said in a statement. "Pure self-direction is largely a fantasy."
Investors across all but the oldest age group over 64 increased the use of financial advisors, but not all warmed up to them to the same degree. Those between the ages of 28 and 39 registered the biggest jump in using financial advisors. In 2012, 60% of investors in this age group said they consulted advisors, with 15% considering them their primary source of advice. By 2014, the percentage of investors using advisors increased to 70%, with 17% viewing them as their primary advice provider.
"Financial services firms and advisors should anticipate the changing advice needs of investors as they age by offering tailored solutions," Brown said. "This strategy will vault a provider from a 'sometimes' source to the 'primary source'."
Younger investors between the ages of 21 and 39 were the heaviest advice users, consulting more than eight sources of information and advice. This made them more like consumers with more than $500,000, who also use more than eight sources, than consumers with less than $100,000, who used 6.4.
Investors between 21 and 27 and those between 40 and 52 added the most advice and information sources over the last two years, while investors over 65 cut back to an average of .3 sources.
The study is based on a survey of more than 5,000 U.S. households conducted in June of 2014.
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