Nine-in-ten affluent investors surveyed do not use a 100 percent technology-based service, nor do they engage in online chat communications with their advisor.
Woody Allen, in his days as a standup comedian, once observed that his father, who had worked at the same company for 12 years, was ultimately replaced by a gadget that did everything he did only much better. “The depressing thing is my mother ran out and bought one,” he joked.
Financial advisors can probably rest easier. There are services they perform that no machine can replicate, but there are instances where an investor might want to go the robo-route. A so-called “robo advisor” is a technology-based platform that automates the investment process, The investor answers questions about his or her investment risk tolerance, age, etc. via an online questionnaire. The investor is then presented a portfolio suggestion determined by a computer algorithm. This provides the ability for anyone to invest, regardless of their financial knowledge, total portfolio picture or the amount of assets they are planning to invest.
Betterment and Wealthfront are two of the larger robo-advisors. Financial providers also plugging in to this growing trend include Schwab with its branded service, Intelligence Portfolios, and Vanguard with its Personal Advisor Services.
Allan Roth, writing for AARP, cites lower fees and tax costs as two reasons why an investor might benefit from using a robo advisor. Another, he writes is “for discipline to avoid the all-too-human fear and greed cycle of buying late in a bull market only to panic and sell after a plunge…Robo-advisers’ software algorithms will automatically rebalance your portfolio when it strays from the target allocations.”
At this point, though, affluent investors are not on board, according to a recent Spectrem Group study, Wealthy Investors and Their Perceptions of Virtual Advisors, Nine-in-ten of those surveyed do not use a 100 percent technology-based service, nor do they engage in online chat communications as opposed to meeting in person with their advisor.
Affluent investors surveyed by Spectrem Group who do use robo-advisors are more likely to be invested in managed accounts, short-term investments, or to own equity products.
As to why they resist using a robo-advisor, at least half said they preferred personalized service and wanted to meet their advisor in person. Almost four-in-ten (36 percent) have trust issues and do not want to share personal information with an online advisor.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.