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Investment Advice from a Robo Advisor

Two Young Women in Front of the Computer TalkingWould you take investment advice from a robo advisor?

In a Kiplinger column, Jan Blakely Holman, CFP writes that “When It Comes to Investment Advice, Humans Beat Computers.” Automation has become a part of so many industries and as time goes on, it will become a bigger part of financial services. You have to decide what approach best suits you.

Before now, one of the last big technological changes to the financial services industry was the way the internet made so much information available to investors. An investor no longer had to rely on a broker or financial advisor; an individual could research and even invest without seeing a professional.

Now, you can let a computer handle your investments. After you answer some questions, a computer program will find investments for you, and if you are willing, the computer will transfer the funds and manage your portfolio. Those who are in favor of this approach say it offers, “a way to get expert portfolio management without having to choose between doing it themselves or hiring a financial adviser.”

Holman disagrees and outlines why she thinks that most people will benefit more from working with a financial advisor. Many of us need more than just fund transfers. We need the other services financial advisors provide, such as “goal setting, financial planning, insurance planning, investment planning, estate planning and legacy planning.”

She goes on to discuss how there are some things that a computer program really can’t do. It can’t necessarily understand your tolerance for risk. It can’t use years of experience to help you see that a certain investment decision, while it may seem perfectly logical, is not going to benefit someone in your situation.

Fee-Only financial advisors are not against technology of course; they just want you to get the best counsel you can. Advances in technology can help financial advisors as they guide you towards reaching your financial goals. While using the latest technology, a Fee-Only financial advisor can offer a personal touch that a robo advisor cannot.