By Shawn McGuire & Matthew Gaude
As Artificial Intelligence AI and robo-advisors become more common, relying on them to handle your finances might seem like the easy option. But when you’re faced with complex situations or unfamiliar economic changes, having a trusted financial advisor to turn to can make all the difference in how your portfolio performs. Working with a human advisor offers a host of benefits that go beyond what a robo-advisor can provide.
The financial advice business is constantly changing with new products and services. After the 2008-2009 financial crisis, new firms were established where they offered a new “robo” service that allowed investors to answer a few questions, establish your time horizon and risk tolerance and the software would provide a recommended portfolio. The software would automatically rebalance as well as handle account deposits and withdrawals. This was great for those investors that did not need a human touch.
Following are some companies that started out as robo-only companies. Since then, some have added the ability to interact with a “human advisor.” As the robo era was being established, private equity companies, venture capital funds, and large investment companies invested hundreds of millions of dollars in these companies, as well as others that are no longer in business. A lot of companies were either sold or went out of business because companies found out pretty quickly that their business model was not profitable and as a result, had to raise additional funds or close down. They found out they could not offer a robo-only advice business when investors also wanted the option of being able to talk to a live human advisor.
Cerulli is a research, analytics and consulting firm that provides research for the financial services industry. Ceruli recently issued a report titled U.S. Retail Investor Products and Platforms 2024 report. Cerulli’s research indicates that more than half of investors with a self-directed investment account beside their primary account say that having a human touchpoint in their investment process is important to them.
The report, which included various behavioral groups such as passive and self-directed investors to advice-seekers and advisor-reliant investors found that 55% said it was important for them to be able to talk to a human specialist who can help with financial planning and guidance.
Now, the industry is jockeying to integrate or build new platforms using artificial intelligence. Right now, it is too early to have any insight into how this will affect the investment advice industry. Currently, custodians such as Pershing, Fidelity, and Schwab as well as investment companies are working on integrating these tools into their service offerings, and by this time next year, there will be more updates.
Regardless of the outcome, we are confident the need for our services will continue to grow as tax regulations become more common and confusing, retirement planning becomes even more important as inflation continues to erode employees earnings and tax planning becomes the most important service offered as tax rates increase while choosing the right type of retirement plan to contribute to will make a huge difference in future tax-free or taxable income.
We view artificial intelligence as a complement that will help us provide more and better services to our clients. As we have seen over the last several decades, various forms of investment services have come and gone, but human advice will always be needed.
Here are four reasons why.
1. Expertise
Robo-advisors are helpful when you’re just starting your financial journey and have smaller balances to manage. Since there are often fewer fees with a robo-advisor, it’s a good fit for beginners. However, if you’ve been letting your robo-advisor run the show for a few years while your finances have grown and become more complex, it might be time to upgrade to a human financial advisor.
These are certified professionals with years of expertise in a wide variety of financial situations. Financial advisors are trained to help clients manage their finances and pursue their money goals. They stay up to date on the latest financial news and trends, which can help you receive the most current and relevant advice. No matter what’s happening in the markets or in your accounts, your financial advisor is equipped to develop the plan you need to pursue your financial goals with confidence.
2. Personalized Advice
The help of a robo-advisor is limited to its algorithm or the lines of code it uses to make decisions; and it only makes decisions with the basic information you provide. Data such as your risk tolerance, investment amount, and time horizon are used to calculate the best investments for you. Again, great for beginners.
When life gets more complex, you need financial advice that’s customized to your specific situation. A financial advisor takes a holistic approach to managing your money by reviewing your situation in greater detail. They get to know you, not just the numbers. They help you identify areas of improvement and find ways to solve your biggest financial issues.
A financial advisor is there to help you lay out a plan toward your financial goals too. A human advisor might help you strategize how you can retire early, how to expand your small business, or how to pay for your child’s college tuition.
3. Emotional Support
Finances are usually seen as a more logical topic, but emotions are deeply connected to your financial situation in ways you might not have considered. During times of economic uncertainty, you might feel scared, stressed, or concerned. When things are going extremely well, you might feel overjoyed, carefree, or impulsive. These emotions affect your ability to make wise financial and investment decisions.
A trustworthy human financial advisor guides you through those decisions with greater clarity. Instead of letting your emotions run the show, advisors look at your situation objectively to help you make an informed decision even in challenging moments.
4. Accountability
If you’ve had trouble sticking to your financial plan before, a financial advisor could provide the accountability you need. Financial advisors and planners can help you create a budget, track your expenses, and monitor your progress toward your financial goals.
They’ll also help you keep those end goals in mind when you consider the other financial decisions you want to make. If your goal is to buy a home, your financial advisor might remind you of that when you want to purchase a new Rolex.
Partner With a Human Advisor
When your financial needs go beyond the basics, relying solely on a robo-advisor might not cut it. That’s where a human touch comes in handy. Financial advisors offer personalized guidance tailored to your specific goals and circumstances that you simply won’t get from AI.
If you’re seeking a comprehensive and personal approach to financial planning, reach out to us at Live Oak Wealth Management. We’re here to provide the personalized support you need. Contact us at 770-552-5968 or email [email protected].
About Shawn
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
About Matthew
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insights and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.