Why are boomers slow to embrace DIY online investing?

My latest Financial Post column has just been published, which you can retrieve  by clicking on the highlighted headline: Boomers slow to embrace online investing but, surprise, it’s not a technology thing.

(Added Thursday: The article has also been published in the print edition of Thursday’s paper, on page FP8, under the headline Boomers ‘fearful’ of online investing: advisor. This Hub version of the column elaborates on a few points, adding the important distinction that newer online do-it-yourself [DIY] investors do NOT have to go without human advice or guidance, which they can get through fee-for-service planners, fee-only money coaches or investment coaches.)

According to a TD Bank Group survey titled Too shy to DIY, 79% of Canadian baby boomers use the Internet for banking but only a paltry 16% are DIY online investors.  The poll of 2,000 Canadian adults was conducted late in July.

Since the Boomers have embraced most aspects of the Internet and are just as addicted to smartphones as Millennials and Generation X, it’s clear (as the headline notes) that “it’s not a technology thing.”

Rather, the main reason for low Boomer use of online investing is lack of investment knowledge: TD says 79% of those surveyed don’t manage their money online because they simply don’t know enough about investing, while 22% say they don’t have enough time to invest on their own.

When I asked Jeff Beck, Associate Vice President at TD Direct Investing, why the disparity he replied with this email:

“The gap between Boomers who bank online and those who invest online can be attributed to the fact that many say they are unfamiliar or uncomfortable with online investing tools. There’s a misperception that online investing is a complicated, time-consuming activity. That’s why TD Direct Investing offers a range of educational resources, tools and support to help investors get off to a great start, whether their goal is active trading, long-term investing, or both.”

So too do the other major discount brokerages as far as I’m aware: TD is one of the discount brokerages our family uses and there’s certainly no dearth of information on investing there or indeed most other major financial institutions.

As a boomer myself I was a tad surprised by the findings. After all, as the FP piece argues, the cost savings from DIY online investing magnify the more money you have. Just by virtue of time spent on the planet, many Boomers should by now have sizeable portfolios, at least the ones that hang out at websites like the Hub!

Wealthy Boomers tend to be web savvy

In fact, as some readers may recall, I once hosted online financial discussion forums called The Wealthy Boomer (based on my 1998 book, The Wealthy Boomer), and that forum (which closed around 2005) featured some very knowledgeable boomer investors (and some younger ones too) who were remarkably savvy about investing as well as the Internet. And my colleague at the Globe & Mail, Rob Carrick, wrote a guide on online investing way back in 2006: How to Pay Less and Save More for Yourself: The Essential Consumer Guide to Canadian Banking and Investing.)  

Furthermore, my book that spawned the Hub — Findependence Day — talks in part about a three-pronged investment strategy that I call The Findependence Day Model. It’s simply a combination of using a discount brokerage to save on commission costs, along with a focus on exchange-traded funds (ETFs) to provide low-cost diversification, plus the crucial third element of human advice or “guidance.” If you can find a fee-for-service financial planner who charges by the project or hour — preferably NOT through asset-based compensation if the fees are as high as most mutual funds charge —  then you can have the best of all worlds of low cost, online access and human advice.

Robos, Money Coaches and Fee-for-Service Planners

Those not comfortable with going from a traditional broker or mutual fund adviser could take the interim step of using a robo-advisor, which provide mostly ETFs packaged up according to your Investment Policy Statement. The typical fee will be 0.5% a year but as I note in the FP article, you can consider this as “training wheels” for a few years if you’re not prepared to jump into buying your own stocks and ETFs at a discount broker. The advisor I use myself was the person who first pushed me to make the leap from traditional brokerage to online investing and I can well understand how some may be reluctant to do so.

Of course, not everyone is suited for DIY investing, and those people should be happy to pay professionals to bear the considerable burden of investing. Robo advisers are a valid option at reasonable cost, as are asset-based Investment Counsellors, some of whom contribute guest blogs to this website.

And as I said, going the online DIY route doesn’t preclude ALSO getting advice or guidance from a fee-based or a fee-for-service advisor. Or you can find a fee-for-service Money Coach, like Sheila Walkington of Money Coaches Canada, who penned a repurposed Hub blog last week titled Getting Unstuck. Or investment coaches like Aman Raina of Sage Investors, who was quoted in the FP piece and has contributed several insightful articles on robo advisers here at the Hub, such as this recent one.

You can find a full list of Canadian and American advisers who “get” Findependence right here at the Hub under the Guidance tab at the top of the home page.