The Human Touch in Financial Advising

Sep 17, 2019 Share This 

Financial_Advisor_or_Robo_AdvisorNot that long ago, the University of Oxford predicted that robots and automation would threaten nearly 50% of the U.S. workforce.1 If the current skilled labor shortage is any indication, their calculations have yet to prove true.

While it may not remove the need for humans, artificial intelligence certainly is changing the way people conduct their lives and conduct business. Likewise, easily accessible apps and online services have convinced many individuals that they can take a do-it-yourself approach to investing.

Some advisors find it a challenge to prove their value to clients when computers can spit out investment options at the click of a mouse or tap of a smartphone. There are many functions and strategies robo-advisors simply can’t perform, however, and advisors that can articulate these qualities are better able to differentiate themselves from automated platforms.

The Hard Truth About Robo Advisors

Before admonishing the downside of robo-investing, there are some hard realities that advisors may need to address with clients. The ability to choose well-performing stocks and investment vehicles is no longer the secret sauce that sets advisors apart. Algorithms and calculations from automated financial advisors can spit out investment advice at lightning speed that may rival that of their human counterparts.

Likewise, automated platforms typically have lower annual management fees around .25%, resulting in an all-in cost that may come in under .5%. Compare this to the average all-in cost of 2% charged by traditional advisors and the conundrum is clear.2 When calculated over the next couple decades, the additional amount held back in annual fees could have a sizeable impact on returns.

Be prepared to overcome these objections. However, before becoming disillusioned over the changing role of advisors and the technological future of the financial industry, it’s good to be reminded of the immense value you bring to the table. More importantly, it’s good to remind clients. 

Financial Planning vs. Investing

When assessing the hierarchy of an advisor’s value, perhaps the greatest foundational benefit is the personalized attention that’s provided. A computer can’t replicate comprehensive financial planning advice that’s tailored to the individual. 

For example, while an automated platform allows someone to plug numbers into a form indicating how much debt they’ve accumulated, an investor will be hard pressed to receive sound financial advice for developing a strategic roadmap to reduce that debt over time.

Other financial planning strategies including advice on how to increase savings, reduce spending, adjust to a shift in income, navigate a changing marital status, and myriad other life circumstances vary widely. These scenarios don’t fit into a formula and algorithms prove futile in their attempts to determine potential outcomes or implications.

As a financial advisor, however, you’ve helped countless clients who’ve had experiences that fall outside the cookie-cutter formulas suggested by robo-advisors. And those unique experiences require a unique approach to investing that’s centered around individualized financial planning advice and one-on-one conversations that can uncover subtleties only a human can detect.

Influencing Investor Behaviors Through Emotional Connection

Artificial intelligence and machine learning are, no doubt, advancing in their ability to mimic human behaviors. What they lack, however, is a strong ability to influence human behaviors. To do that requires an emotional connection and accountability.

Robo-advisors are not designed to manage the emotional component of investing. When the market takes a dip or a client is tempted to shift course against his or her better judgement, a traditional financial advisor is there to help calm fears and make rational decisions. A computer can’t do that, nor can it show empathy or have the hard conversations that might need to take place, such as addressing overspending, talking through the potential long-term consequences of early retirement, showing how unexpected healthcare costs may require a shift in direction, or explaining the implications of changing tax codes. Many of these issues simply aren’t on people’s radars and can easily be missed without a face-to-face conversation.

The way today’s financial industry operates requires that advisors leverage various technology to manage client portfolios and relationships, but it’s your human touch and expertise that ultimately are the differentiators that help clients invest wisely and reach their long-term investment goals. 

Help potential and existing clients gain a deeper understanding of the value offered by a financial advisor by sharing our complimentary guidebook with them, Defusing Emotions: An Advisor’s Role in Disciplined Long-Term Investing. Simply click the link below.

Defusing Emotions: An Advisor’s Role In Disciplined Long-Term Investing


1Oxford Martin School, Automation and the Future of Work – Understanding the Numbers, April 13, 2018

2NerdWallet, Why You Should Love Robo-Advisors, April 4, 2019


Topics: Client Relationships, Advanced Planning