While robos can help simplify processes, human relationships are key to satisfaction, says one investment survey
At its core, investing is seen by many as a data-driven activity. So, it’s not surprising that so-called “robo-advisors” might be perceived as the next big thing in portfolio management, especially when the services are offered at a fraction of the price of a human advisor. But there’s a problem with that theory: Many investors highly value the care and concern that come from human financial advisors and simply aren’t willing to hand over their nest eggs to a “robot.”
The value of the human touch was reinforced by a 2016 Gallup survey.1 Participants were asked whether certain positive qualities were more applicable to robo-advisors or human advisors. Robo-advisors outranked human advisors in just one of those 10 qualities: charges lower fees (63% attributed this more to robo-advisors and 26% to human advisors). In second place was “simplifies the investing process for investors;” only about one in three investors associated that quality more with robo-advisors.Continue
While online tools are increasingly being adopted by investors, we believe people will continue to benefit from access to skilled advisors
So-called robo-advisors — services that provide automated investment recommendations — have gained acceptance in recent years for their ability to provide investors with easily accessible, around-the-clock financial services.
Not surprisingly, one of the biggest questions I hear in the industry is whether or not technology will ultimately supplant the human element of investment advice. After all, many people remember how travel agents used to be a critical part of vacation planning, before the internet age made it easy to book airlines and hotels yourself.
I believe digital tools can enhance the advisor-investor relationship, not end it. Instead of viewing financial technology as a replacement for traditional, relationship-based advice, I believe it should be viewed as a complement to the advisor’s existing practice.
Parallels with the tax preparation industryContinue
How ‘fintech’ can help enhance the investor-advisor relationship
While the financial services industry is often viewed from the outside as staid and unchanging, the truth of the matter is that a sea change is underway, radically transforming the industry. In many ways, this is good news. Enhanced transparency and a choice of service models may benefit investors. But these changes need to be understood.
The latest buzz is about automated investing — often referred to by its catchier name: robo-advice. I want to give robo-advice its due. The services under this moniker represent a marked improvement over the do-it-yourself approach to investing, which may provide investors with the means to invest, but with limited guidance as to where.
As a believer in innovation, I place high value on the power of new technology. For many investors, I believe a financial advisor remains the better option versus a fully automated approach, but better still is an advisor who embraces technology for what it is — a tool to better serve his or her clients.
How technology can help advisors serve investorsContinue