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 Daytalks 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.


5 thoughts on “Why are boomers slow to embrace DIY online investing?

  1. The problem is that the tools offered are not checked for errors omission or completeness and the contract terms offered going from my encounters try to shift liability for harm due to the big banks negligence to the retail investor. Which is contrary to security law osfi mandate and iiroc rules which state unequivocally that dealer brokers are fully accountable and responsible for any good services and functions they outsource to third party vendors. (including those “tools”to make informed decisions.
    Further oversights focus ignores many legal entitlements that diy investors have as if not using an intermediary means a lesser entitlement to protection.
    Most of the media chatter is related to legacy services
    Many retail are unaware of just how much of the fee drain for advisor services goes on and impact on their bottom line. Many are not aware of the difference between having a standards that focuses on clients best interests vs suitable. Or that there is a difference between advisor and adviser.
    The use of technical jargon also is a deterent rather than Plain language
    And many aren’t aware of the issues and pitfall potential from legacy services or that diy is even an option
    And it is questionable as to whether it is even in the industries financial interests to promote diy. Aside from regulatory oversights disinterest in this emerging business model and compliance concerns
    Many upon leaving employers are provided a list of financial consultants
    Basically retail are not aware of just how problematic advisory related industry is and believe that by checking to see if an entity is registered that this is sufficient guarantee of quality compliance control. They could start by reading the many memos by the Investor advisory panel
    What they may not be aware of is just how little real control oversight has over mainstream industry players. And that suitability is not the same as acting in the investors best interest and why this harms their bottom line financially. And this is before heading into financial literacy issues.

  2. How many people over 50 are comfortable on their computers doing transactions of any kind? A typical scenario you put an order for stock, merchandise and other products and the computer does not respond properly. Now you are left wondering did order get through? What do you do?
    Do you place the order again, do you call the firm you are dealing with and wait until someone not a robot answers your call(probably in a foreign country) in broken English or do you log out and log back in? If you are dealing in hundreds or thousands of dollars it is not a pleasant experience.
    So why use the Internet if you are not comfortable?
    I have been trading on the Internet for several years and I have worked with computers since the sixties, so I am more comfortable than most seniors are around computers but still find the Internet and home computing a mixed bag of problems.

    1. Oversight don’t act as if diy investing even exists. The advisor adviser model is a legacy item. Diy is newer.
      Further many millenials would not have the nest eggs that they feel would want an advisory type service. So the statistics are artIficially skewed even if accurate. And 16 percent is actually impressive. But since oversight ignore this group and they are “the experts” why would consumers be any wiser? The law doesn’t ignore this group but oversight do. Oddly.

  3. You rcolumn is (October 19) is almost scary only 16 percent caring for their own money. Start with no one cares more about my money than I do.

    Those would have should be investing time and effort to manage their own affairs. It’s not hard, I am another who has been doing for 20 years plus. I consider one the best money management days ever to be the day my broker fired me as a client for trading online to avoid the outrageous commissions. I only wish I had had these cost saving opportunities years earlier.

    Stephen Decarie
    Calgary AB
    Or Langford BC

  4. I have checked a few ETF sites, and it appears that you have to pay an upfront commission, and a comm. when you trade….

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