Where the robo meets the road: Connecting robo-advisors with human financial planners
Automation has put a whole lot of people out of work. Robots are building cars, packing boxes, unloading ships, and even giving financial advice. Each of these robots is built for a slightly different purpose, but they all have one overriding goal: efficiency. When formerly expensive processes are automated, labor costs go down and production goes up, leading to lower prices for consumers.
When it comes to financial advice, so-called “roboadvisors” represent a great democratization of many financial planning services. Previously, in order to get quality financial advice, you had to pay quite a bit for it. This meant that only people who have a lot of money to invest would get access to the best planning tools. For the rest of us, there was either the frustrating trial and error of learning investment, or the “commission-based” financial advice which was good for brokers, but not so good for clients.
Roboadvisors have made it cheaper and easier for everyone to get access to the best in financial advice. Tools like Turboadvisor have made it possible for individuals to take control of their retirement like never before. With a little bit of information and a little bit of time, individual investors can take total control over their financial futures. They can do this for pennies on the dollar compared to traditional financial advising.
They’re not getting discount-rate advice, either. Turboadvisor, for example, uses Modern Portfolio Theory, a Nobel-Prize winning approach to investment that maximizes portfolio gains by minimizing taxes and fees. It’s the same approach many professional financial planners would take in setting up a portfolio, but it’s done for a fraction of the cost.
There’s also the added benefit of convenience. Most traditional financial planners would be somewhat off put, to say the least, if a client showed up to a meeting in pajamas, or at 3 AM on a Saturday. Roboadvisors, though, don’t care. You don’t need an appointment. You can pick up and put down your financial planning whenever you want.
Is there still a place in the financial services world for human financial planners? Of course. Roboadvisors can come up with perfect portfolio plans for a given set of retirement goals, but these plans are only as good as investors’ ability to stick with them. Human financial planners can still help bridge that gap by providing motivation and encouragement.
Human financial planners also build relationships between investors and financial plans. A roboadvisor can establish with some confidence how much money an investor will have at retirement. A human planner can take that figure and help a client understand if that’s enough for an investor’s lifestyle and plans. There’s still plenty of space in the financial service industry for soft skills.
Financial services may be unique in their synthesis of human and technology. The best possible advice is available cheaply from a machine. The soft skills to put it into action can come from people.