Episode 3: Revenge of the Advisor

No matter how far technology advances, personal relationship and customized advice can never be replaced by technology, which leaves me to discuss some of the limitations inherent in robo-advisors.

Here are the links to episode 1 and episode 2 to refresh you on the series:I am a big believer in the value of financial planning and customized advice designed for each individuals unique needs.  In my view investors that work with advisors do better than those who don’t.  Individual investors tend to underperform the market. Professors Brad Barber and Terrance Odean have devoted well over a decade to studying how individuals invest. One of their most well-known studies, “Trading is Hazardous to Your Wealth: The Common Stock Performance of Individual Investors,” concluded that the average individual investor underperformed a market index by 1.5% a year. The same study also demonstrated that active traders underperformed by 6.5% annually.

A financial advisor can help you in so many ways beyond just potentially improving investment returns.  We can help you prioritize your financial goals and develop a plan to help you work towards them.  We can help you simplify the complex issues that are rife your financial life.  We help our clients develop plans to pay down debt or fund children’s education.  These are things that a computer can never replace.

Computers may be able to help with investment management for the tech savvy younger generation and may even become more beneficial in overall portfolio management, but they will never replace the relationship with a professional, client focused financial advisor whom you can trust..  I, personally have seen clients start their family, have a grandchild, sell a business, begin retirement, even to the conclusion of all such planning at the end of one’s life.  No algorithm, no matter how sophisticated, will ever be able to replicate those experiences and relationships.

My hope in the end is that every investor going it alone can find an advisor living or computerize that they can trust and understands their goals and needs.

Another Thought From the Factory on Main

Best Wishes and until next time
Peter Huminski
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.