When investors panic, they need an advisor they know and trust to calm them down and prevent them from making rash investment decisions. Human advisors do something a robot can’t—they understand emotion, they help navigate client fears and they provide reassurance in a moment of panic. Of course, financial advisors are aided by technological innovations, such as dashboards in online platforms, which present a holistic view of an investor’s entire financial picture. Robo-advisory platforms only offer efficiency, data and algorithms with no human insight or direction, and when the technology fails, investors are left hanging.
Just as Alexa can’t fulfill its purpose for consumers without Amazon employees to review and process customer orders, wealth management applications can’t truly empower investors to pursue their long-term financial goals without human advisors to help investors understand the data, asset allocations, investments, market commentary and other content on the dashboards.
Technology alone can’t apply such tax-smart strategies to other areas of an investor’s life beyond their portfolio, such as mortgages and student loans, or explain to investors how the recently passed tax reform legislation will affect them—and what actions they can take in response.
The experience we had with my daughter and Amazon shows that technological innovation can deliver efficiency, but without a human touch it can create unforeseen problems. Financial advisors and tax professionals should remember this as their practices continue to adapt to advances in the technology available to consumers.
Bob Oros is CEO of HD Vest Financial Services.