Perhaps the best analogy for a robo-advisor is the self-driving car: it’s cool and impressive — sometimes even useful — but in many situations the technology can be incompatible or downright dangerous. Robo-advisors can provide useful advice to the small-balance investor who wants to get pointed in the right direction, but if you are beyond this point, proceed with caution. Talk to a human. The more complex your situation, the more negative your experience is likely to be with a robo-advisor — and the more value you can receive from the right financial services professional.
The idea is simple. Type in a few parameters about your life, income and goals and a computer system will produce a custom investment plan just for you. The computer becomes your advisor. The simplicity of this approach is alluring.
Computer-assisted investment advice can be a very good thing. The truth of the matter is that computers guide the work of financial service professionals every day as they help clients make investment decisions. So it would be disingenuous to say that computers are not a critical part of achieving solid investment returns.
However, robo-advisors today focus primarily on investment returns, and investment returns alone are not enough to build long-term, lasting wealth.
You need a comprehensive approach that certainly includes investment advice, but it also needs to include tax strategies, estate plannning, financial planning, risk assessments and retirement considerations. Only humans can take all of these factors into consideration today and build an all-encompassing strategy that is custom-tailored to your needs.
You might be thinking that you don’t need all of those things right now. That could be true. Most young people who are building wealth will only need to figure out what to do in these areas as their life situation changes.
But everyone needs a good financial plan, strategies to mitigate taxes, a clear picture of where they are at-risk of financial losses and a timeline for successful retirement. An honest-to-goodness person-to-person relationship is most likely to achieve these goals.
Here are five reasons why individuals and families need a human financial advisor:
In our 2015 MarketPulse trend study, we introduce our first annual WellnessPulse benchmarking study, in which we survey our clients about their wellness programs and share key results. We also cover trends in executive compensation and benefits, health plan design, healthcare reform, social engineering and cyber risks, workers' compensation, and retirement benefits.
Download the PDF: MarketPulse 2015
Retirement planning is very different from planning for other benefits because the end goal is many years – even decades – away. It’s impossible to develop a foolproof plan that will guide a 25 year-old to her retirement 40 years later. But the practice of planning, the financial education obtained and the savings habits created along the journey can steer employees closer to reaching their retirement goals.
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