Boomers yet to warm to online investing, but online part isn’t problem

Lack of knowledge makes them fearful of using tools, Jonathan Chevreau writes.

Canada’s baby boomers are comfortable with the internet for most things but a glaring exception is investing online through discount brokerages, according to a TD Bank Group survey titled Too shy to DIY. (DIY stands for Do it Yourself ).

Almost four in five boomers (79 per cent) use the internet for banking but only a paltry 16 per cent are online do-it-yourself (DIY) investors, says the poll of 2,000 Canadian adults conducted late in July.

Asked why this disparity exists, TD Direct Investing associate vice-president Jeff Beck said via email it “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.”

But the survey also found Boomers would invest online if they had a human being to hold their hands in the early going and ask them investing questions. And 42 per cent would feel more comfortable if they were provided with additional information about online investing.

I’m not sure shyness has much to do with this. The issue isn’t so much technological savvy as confidence and knowledge about investing. Aman Raina, an investment coach at Sage Investors, says it’s “not a technology thing. Clearly, Boomers have integrated technology into their lives in a variety of forms. They can setup a broker account or robo (advisor) account and transfer money in and out. They’re okay with the mechanics.”

But many are confused, intimidated or “ultimately fearful” about making the right choices from the thousands of investments available to them, Raina says.

Those emotions may have stemmed from various market crashes this century: “The current model of using an adviser and having that dependency relationship (‘tell me what to do!’) has failed.” Boomers want someone to get on the right path and be a sounding off board to bounce ideas, he added.

As a baby boomer myself, and someone who has been a DIY investor online at two different bank-owned discount brokerages for a few decades, I found these results confounding. TD found 50 per cent of boomers spend at least 15 hours a week on the internet, only a tad less than the 58 per cent for millennials. Ninety-four per cent of boomers use the web because it’s convenient and 84 per cent find it easy. Plus, 77 per cent use the internet to read news online, 66 per cent to shop via Amazon.com or its rivals, and 64 per cent stay connected with friends and family through social networks like Facebook or Twitter.

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

I myself had to be nudged to move from a traditional brokerage model to online DIY investing — by one of my sources for my personal finance column in this paper, a fee-for-service financial planner who became my own adviser.

Once I got the hang of it, I wrote a book (Findependence Day) that described how DIY investors can go online and buy ETFs or other securities, saving a bundle on the high commissions of the traditional brokerage model or the alternative route of asset-based investment advice. I found the low costs and investment control didn’t have to preclude good investment advice or guidance.

With the numerous financial discussion forums on both sides

The current model of using an adviser and having that dependency relationship (tell me what to do!’) has failed.

of the border, it’s hard to accept that lack of investment knowledge is a valid excuse for not trying online investing.

Of course, the older you are the more money you likely have, which means boomers can save a lot of money with online DIY investing compared to owning mutual funds or using assetbased advisers.

Younger investors are probably more inclined to use online investing but their relative cost savings will be less dramatic than with the large portfolios some boomers have.

I’d argue a good starting point are robo-advisers, which are essentially automated portfolios of ETFs that provide basic allocation and a modicum of human advice. A typical cost of 0.5 per cent per annum on assets under management is reasonable and once comfortable, you could take off the training wheels, go fully DIY online and save even more on fees.

Once done, you would find a wealth of information and support. As Beck aptly puts it, the idea is to invest for yourself, not by yourself.