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J.D. Power: Robo-advisers poised for growth as self-directed investors seek more guidance


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J.D. Power: Robo-advisers poised for growth as self-directed investors seek more guidance

Robo-advisers might offer a low-cost alternative to workingwith a traditional full-service adviser, as self-directed investors look formore guidance from their brokerage firms, according to the J.D. Power 2016 CanadianSelf-Directed Investor Satisfaction Study.

The study found that among self-directed investors, a greaterpercentage of millennials are seeking guidance, with 37% of millennialself-directed investors having a secondary full-service investment account,compared with 24% of baby boomers.

The study measures satisfaction among investors who do notwork with an adviser for their primary account with their brokerage firm acrosssix key factors: interaction, account information, trading charges and fees, productofferings, information resources and problem resolution.

National Bank of Canada unit National Bank Direct Brokerageranked highest in self-directed investor satisfaction for the secondconsecutive year, with a score of 774 on a 1,000-point scale, followed by BMOInvestorLine at 762, and CIBC Investor's Edge and RBC Direct Investing at 751.

The study found that robo-advisers have the highest appealamong millennials, now the largest segment of the workforce, with 66% ofmillennial investors indicating interest in robo-advice compared with 54% ofall investors. Among those millennials who have used robo-advice, 54% areeither equally satisfied or more satisfied with their robo-advisers as withtheir primary self-directed firm.

The study also noted that Canada's Client RelationshipManagement regulatory initiative made little progress in terms of increasingtransparency and investors' understanding of fees. In 2016, 39% ofself-directed investors said they had a complete understanding of the feescharged to them, compared with the same in 2012.

Fifty-nine percent of millennials said they would switch toself-directed providers from full-service advisers if dissatisfied with theirfees, compared with 49% of baby boomers.