Following the post-COVID stimulus hangover in 2022, the bull market has continued to run. One of the key factors was the Federal Reserve’s decision to
Beware of Robots: Why You Want a Human Advisor
Published Date : July 28, 2015
The term “robo-advisor” has been getting so much press lately you’d think we were facing the rise of the machines. Images of an “advisor” who looks and sounds like C3PO from Star Wars asking, “When do you plan to retire? I repeat, when do you plan to retire?” run through my mind. Actually, robo or digital advisors are less like advisors and more like a programmed mutual funds solution. There is little or no interaction with a human – or even a robot for that matter – only online questionnaires designed to determine tolerances for risk and investment time horizons. The computer generated responses and the corresponding selection of a few mutual funds are offered as a long-term investment portfolio suited to your needs. But how well could a mathematical algorithm really know you and what you hope to achieve over time? Is personalized planning and advice critical to investor success?
At Sand Hill, we spend considerable time getting to know our clients and their circumstances, and understanding their needs. We learn about their risk tolerance not only from a questionnaire, but through ongoing discussion and observation over the course of our long relationships. This is a critical part of the process. Identifying an appropriate risk and reward investment strategy – not only for today but for the long-term – is a key component of successful investing. We help our clients stick with their investment plan and asset allocation strategy when it is difficult to do so — like when the market is down significantly — and their instinct is to abandon their plan for what feels like safety. We continue to rebalance portfolios when attractive opportunities arise. We educate our clients about why buying when it is uncomfortable to do so is often optimal and how it will serve them well in the long-run. Will a robot advisor have a problem if you want to sell at the bottom of the market or will it offer advice and hand-holding to help you to hang in there when you need it most?
Helping our clients with planning opportunities and working with their Trust and Estate Attorney and CPA to manage tax obligations, provide appropriately for children and grandchildren, and fund philanthropic objectives are central to our work and are clearly incremental services when compared to digital advisors. We conduct thorough reviews of current lifestyle needs and projected cash needs many years into the future using Monte Carlo simulation to help clients consider if they can buy a second home, pay for a grandchild’s tuition, or establish a family foundation. Having strong relationships with our clients and knowing what is important to them helps us to initiate crucial conversations pro-actively. There is seldom if ever an easy answer to complex questions like, “How much is enough (or too much, for that matter) to leave to my kids?” The answer to this question and others is unique to each family. Having an experienced advisor to act as a sounding board during the planning process —one who is willing to work with your kids once the plan is in place — can make all the difference.
There can be a role for digital advisors, though. Investors just starting to accumulate assets can gain some familiarity with investment vehicles and concepts such as “risk tolerance,” diversification, and rebalancing. Also, Do It Yourself-type investors with small portfolios are likely to be among those who consider robo advisors. Many such investors may not have lived through a bear market and see little need to pay for professional advice. Robo advisors have not been around for such difficult periods either so it is unknown how they will perform in the face of a significant market weakness. For investors with significant resources and complex wealth and planning needs, my money is on the humans.
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
Video Presentations
All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
Other Posts By This Author
- – Understanding the Terms: All About That Basis
- – Home Sweet RV
- – The Basics of Long-Term Care Insurance
- – Roth IRA Conversion: 2023 May Be Your Year
Related Posts
- – The Flexibility of the California Uniform Directed Trust Act
- – An Optimal Approach to Beneficiary Designations and Your Children
- – The Indispensable Role of Professional Eldercare Management Services
- – Understanding Qualified Charitable Donations: A Guide for Donors
- – Caring for Our Feline and Canine Companions
Recent Posts
