In so many aspects of our lives – think the internet, mobile phones, satellite navigation – technology has changed the way we conduct our day to day lives. From convenience to speed, for the most part, it would be hard to deny that these advances haven’t been a positive thing.
Attracting an increase in media headlines over recent years, Robo-Advisers are doing their best to entice even the most unseasoned investors into giving investing a go. Yet when it comes to something as important as investing and planning our finances, can a so-called ‘Robo-Adviser’ really replace the real thing? To answer the question, it’s important to be clear what Robo-Advisers are; in short, they are digital platforms that provide automated, algorithm-driven financial planning services with little or no human interaction.
But with our lifestyle goals and financial needs being as unique as we are, it begs the question as to whether an online algorithm can take our finances to where they need to be.
Those in favour of Robo-Advisers do make some valid points. They have helped introduce those previously apprehensive about investing their finances to take an interest, functioning as a great platform to educate people into the importance of planning for the future and, in most cases, seeking additional advice from a qualified financial adviser to take their plans to the next stage. With interest rates having sat so low for so long, inspiring people to invest their money, no matter how small, is an encouraging step forward. They are also said to be a useful alternative for those whose tax situation is not particularly complicated or with only small amounts of money to invest, as you can simply set your investing goals, your income and your attitude to risk and then leave the Robo-Adviser to do the rest.
But when it comes to investing our money, it’s rarely just about the numbers. Without knowing it, we are all subject to biases and prejudices, many of which are unseen and a function of our subconscious. Are you more strongly driven by the fear of losing or the chance of winning? Are you influenced by an experience that was in fact luck not skill? Do you have a short or long-term outlook? A Robo-Adviser can only use the information you to give it and formulates a plan based on numbers; it can’t get to know you as an individual, understand the rationale and emotions that drive your financial decisions, have the perspective or context to adjust investments to your changing needs or motivate you to better focus on achieving your financial goals. Financial advisers can offer something that Robo-Advisers will never be able to replicate; the human touch.
This is an issue that a number of Robo-Advice firms are starting to recognise; in an article by the FTAdviser, it was highlighted how some platforms have started to investigate the option of incorporating some level of human involvement to complement their online-only services.
Whilst there are many aspects of our lives that we can successfully manage online, bringing them all together and viewing them as a whole is rarely as straightforward – you may have pensions invested in one place, stocks and shares in another and your ISA savings somewhere else again. This is where a financial adviser can help you, as financial plans are usually best achieved when looking at the bigger picture, not just investments alone. They can also help you with financial issues beyond investing, such as budgeting your outgoings, making a career change, insurance needs, university funding or planning when to retire, as well as working alongside your other advisers, for example accountants and solicitors, to deliver a more holistic approach to your lifestyle planning goals. Additionally, they can employ intergenerational strategies to achieve greater tax efficiencies across your entire family, not just for yourself, and provide an ongoing review of the suitability of your investments.
Whilst there is clearly a place in the market for managing some of our finances online, having a financial adviser who knows you as a person, understands your business and personal aspirations, and can be at the end of the phone to answer your questions, is something that online-only providers simply can’t do. What’s more, with increased transparency of fees amongst financial advisers, investors can see exactly what they are paying for, just as they can when using Robo-Advisers. So, when it comes to tailored financial planning solutions, pound for pound, it’s hard to ignore the value that real financial advisers can bring to the table.
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