Financial technology is growing and improving every day and robo- and hybrid-advisors are creating a more accessible and affordable way to get financial guidance. With all the progress, many people have asked me this question: Are financial advisors going to become obsolete?
Naturally as a financial advisor, I sure hope not. But I also really don’t think that’s going to happen.
Yes, things are changing.
A few decades ago, financial advisors were mostly stockbrokers with access to information that the average person did not have. The advisor’s value lay in his knowledge and understanding of publicly traded companies, fund managers and financial products that the general public did not have.
However, at this point, information has been democratized. It is readily available to anyone who wants to learn more and has access to a good internet connection.
This is why I feel the role and value of a financial advisor is not over, it is just different.
The math is the easy part.
There are AI tools, algorithms and software that are now capable of completely designing an investment portfolio in the time it takes you to answer a questionnaire about your risk tolerance. However, this does not give the complete picture. In fact, it gives a very small piece of a corner of a very large painting.
Your answers to the risk questionnaire will vary from day to day depending on what is happening around you. If you filled out a risk questionnaire in 2008-2009, your answers would be different than if you filled it out during the Roaring ’90s when everything was going up.
If you filled it out on Monday after winning $20 on a lottery ticket, it would be different than if you filled it out on Tuesday after hearing a rumor about company-wide layoffs.
What is difficult for a computer, an algorithm or a questionnaire to understand are the psychological and behavioral aspects of finance, and it is especially difficult to make a computer feel empathy.
The new role of a financial advisor.
What a financial advisor has that I think is irreplaceable is experience.
A person plans to retire once in his life. It is almost a make it or break it scenario. Navigating that using only numbers and algorithms probably won’t help you feel safe.
While a computer can allocate your portfolio, it cannot help you make inferences about what is happening in the markets, where you are in your life, or how current circumstances are going to affect you.
Financial advisors are now becoming financial personal trainers. They are accountability partners to steer you in the right direction when your brain is telling you to do something else. When you want to sit on the couch because you saw the market take a dive, your advisor is asking you to make another round of contributions because the stock just went on sale.
While retirement is a one-time experience for most people, it is something I look forward to every day. I see people who do it well and people who don’t. It’s that experience and the ability to have an unbiased third-party opinion when you’re overwhelmed with options or see bad news on TV.
In the same way that WebMD didn’t put doctors out of business and Turbo Tax didn’t eliminate tax accountants, I don’t see technology replacing financial advisors.
With so much access to information, having someone who actually knows the importance of each aspect of financial planning and can act with logic and experience rather than impulse and emotion is more important than ever. You only get one chance to retire comfortably and I want to see you do it.
The opinions expressed in this commentary are those of the author and are not necessarily those of Kestra Investment Services, LLC or Kestra Advisory Services, LLC. It is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is recommended that you consult with your financial professional, attorney or tax advisor regarding your individual situation. Comments relating to past performance are not intended to be forward-looking and should not be considered indicative of future results.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services provided through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Brotman Financial Group, Inc. and BFG Financial Advisors is not affiliated with Kestra IS or Kestra AS.
Investor Disclosures: https://bit.ly/KF-Disclosures
Credit: www.forbes.com /