Human or AI?

People tend to conceptualise financial advisors as people who only help super-wealthy individuals and their families, but this isn’t accurate.

Financial advisors, more commonly assist families who need help with planning for retirement, saving for their children’s college fees, buying a home, and taking care of other major financial goals.

A financial advisor can assist you with your investment decisions and help you to keep an emotional distance from your money so that you can make the best long-term plan for your money. Your financial advisor will help you allocate funds into a portfolio that best matches your personal risk comfort level.

If you are suddenly facing a new or even drastic change to your finances, such as receiving a large inheritance that you aren’t sure how to invest, a financial advisor will help you to decide what to do with your money and how to handle any tax issues this may bring.

You may be a person who is comfortable with their financial situation, but there’s no harm in having a fresh set of eyes to look over your financials for you, if only to ensure they are performing well, and you are invested correctly. If, however, you hate dealing with finances, don’t understand the first thing about implementing an effective investment strategy, then a financial advisor is right for you. And if you feel stressed over your money or feel like you’re not making the best decisions about your money, then a financial advisor would be a wise move to consider.

Robo advisers can be extremely helpful, but often-times they won’t be as beneficial as an actual person who has a face-to-face conversation with you can be. That’s because most situations are too personal for an algorithm to deal with. You could argue that a robo adviser is an unbiased way to ensure the company isn’t pushing their own investment products on you. And then there’s the subject of rebalancing. Rebalancing is a strategy to keep your percentage invested in stocks, bonds, and other funds constant and in line with your preferences. You can do this on your own or have your investment advisor perform this task, but a robo advisor does in fact, do a great job of automating this tedious investment task.

Most robo adviser platforms do not provide access to Certified Financial Planner professionals. If that is something that is important to you, then it’s also something you should enquire about beforehand. Despite robo advisors’ many advantages, there are some tasks best left to a human, especially if you’re very wealthy and/or have complicated financial needs. For example – the process of determining an investor’s tolerance for risk is based on scientific principles and research, and most automated investment platforms use an online questionnaire to assess risk tolerance and goals. 

Then there is the matter of trust. And it’s nothing to be sniffed at either. Trust is the main reason a person will come to you for advice. And trust is likely to be the main reason they stay with you as a client. When you trust someone, you tend to be much more open, forthcoming, and reflective with the things you may not be with others. Trust comes from ‘communicating’ with a human, and money is a sensitive topic.

The questions to ask yourself when deciding between human or AI regarding your finances are, do I want someone to just manage my money, or do I want to be able to talk about my money also? Do I want an investment management tool, or do I want an investment management tool along with a financial planning relationship? 

Whatever you decide upon, you should first know who you are as an investor, and what you want to achieve in the long-term. A sophisticated algorithm or not, your robo advisor probably won’t be able to beat the stock market. But then again … neither will your human advisor. 

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