More than one-in-three respondents in FactSet’s survey were unable to identify a risky portfolio, and one-in-five could correctly define the word volatility in the context of markets and investing. Younger investors were the most prone to selecting incorrect answers.
Younger high-net-worth investors in the survey also displayed low levels of confidence in their investment strategies: Only 15 percent of the respondents under age 35 said they were confident enough in their investment strategies to forego a call with their advisors.
Financial advisory firms must reduce and mitigate human error, says FactSet, because regulation and margin compression have increased the risks associated with mistakes. When implemented correctly, technology can help bridge the divide.
Technology also seems to be an effective means for interacting with elite clientele, according to FactSet, as the wealthiest investors also tend to be the most digitally active: High-net-worth investors in the survey already conduct 44 percent of their interactions with their advisors online.
For the study, FactSet sponsored a survey of 1,123 high-net-worth investors from the U.S., Australia, Canada, Hong Kong, Singapore, Switzerland and the U.K. in February 2017.