Have You Forgotten That Money Is An Emotional Vehicle?
Much has been said about Robo-Advisory and its comparison to traditional human advice. The bulk of arguments focus around low-cost and passive investing, which is basically questioning a financial advisor’s value in a passive aggressive, manner.
Has anyone actually taken a step back and review the macro scenario that ‘thought leaders’ may have overlooked? It’s all good to talk about passive investing and low cost and devaluing the human element in financial advice during one of the longest bull markets (March 2009 to Present) in recent memory; however, people seem to forget that there are cycles to an economy.
It’s very convenient for thought leaders and businesses to speak of removing the human element from financial advice because the good times are still rolling! Have you ever stopped to consider when things hit the fan, all of these investors who have chosen a pure Robo-Advisor will have limited resources to speak to a live financial advisor? Do you believe that when the next economic recession hits, these pure Robo-Advisors will just miraculously have a team of financial advisors ready to take your call and empathize with your recent 35%-45% loss in your investment portfolio? You will likely receive an email from the pure Robo-Advisor articulating why people need to remain invested; think long-term, etc., etc., etc. An email.
Why is this even worth noting? Simply put, money is an emotional vehicle. Not the currency itself, but what it represents. When looking at money, most people value the money from a reference point as to what it can buy them. People work years for that money and through circumstance, there are times when they will lose it due to economic forces. When that loss occurs, people will search for accountability and they will not be looking in the mirror for the person who is accountable. There is a high degree of probability that the finger will point to the person/company that suggested the portfolio. In this case it will be the pure Robo-Advisor.
Good luck relying on that small, efficiently priced customer service desk. Expect massive wait times and when you finally speak to someone, they don’t know you from a hole in the wall and you will get a compliance-approved, crafted response that the previous caller received, as well.
I’m not pro traditional human-advice and I’m not pro pure Robo-Advisor. I’m pro-service and value and Bionic Advisory binds the best of both worlds, together. If that allows the industry to charge more or increase management fees, then, I’m for that too! The Robo-Advisor aspect of the wealth management process is needed and warranted. The technology and the number of improvements and problems Robo-Advisors solve are many; however, there is one major aspect that pure Robo-Advice does not solve for and that’s the human element of financial advisory. It’s all good when people are making money and the argument is convenient but people forget that money is extremely emotional and when it is parted from their hand that earned it without comprehension, you better be available to take a call.
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