By Sam Whybrow, Lubbock Fine Wealth Management LLP
’Robo-advice‘ is a term coined to describe computer-led advice at the expense of face to face financial advice. I am involved at the front line, helping to develop a robo-advice service with technology provider Advicefront. It’s an exciting new development in the world of financial advice.
There are many opinions on both sides of the fence championing both ‘robo’ and ‘face to face’ advice. Simply put, I believe that both can work in tandem; embracing the best parts of technology (efficiency, systematic and scientific outcomes) and human intellect (emotion, reasoning, problem solving and curiosity).
As a society we are very familiar with technology helping with everyday functions such as banking, travel arrangements and shopping, so why not for financial advice?
Some opinion suggests that robo-advice will only be for those who cannot afford face to face advice. Robo-advice has a place regardless of affordability, especially in the early stages of advice, as it can help people improve their financial understanding and add to their confidence around money matters. It can also remove unnecessary fees and help people to engage with their finances. Increased engagement with financial matters is something we could all do with. Who can honestly say they have never turned a blind eye to matters concerning money or suffered from ostrich syndrome?
With robo-advice, clients who might have a simpler financial position could ‘self manage’ their position and engage a financial advisor for guidance when required. That must surely only be a good thing? If their position or confidence changes, in due course, face to face advice can be sought at a time that is more financially viable for them. Even for those with more complex financial positions, engaging a financial advisor might, for whatever reason, not be on their agenda and robo-advice might provide some initial guidance for them. I would always advocate seeking professional help in some capacity, no matter what the circumstances, but life is about personal preference and choice, right?
On the flipside I cannot envisage a time when robo-advice would replace face to face financial planning as robots do not have the emotional capacity required to interact with people. Like it or not, money evokes many emotions in people such as anger, pleasure, joy, sadness, jealousy and fear. How would a robot deal with someone who is in the midst of a messy divorce or who has lost their job; someone who lacks confidence with money, has inherited money or a successful person who simply doesn’t have time to devote to financial matters?
Filling out a series of online questions does not necessarily mean the robo-adviser has considered the many nuances that we as human beings face on a day to day basis. Should I save for my future, spend more or give more to my kids or charity? Would the robo-adviser be able to understand the person in front of the computer and elicit their innermost thoughts? How would it navigate its way through the maze of uncertainty a person might be feeling regarding their financial position?
Without question, online technology helps with many aspects of our lives but we must not forget that ‘going online’ is not the panacea for everything. Take self diagnosis on health matters for example. It is fair to say that regardless of how much time we spend on the computer completing health questionnaires, reading about symptoms and fantasising about illnesses that we may or may not have, it isn’t until that first visit to the doctor that an evaluated and fair diagnosis can be made. Does this sound like a fair comparison with the robo-advice argument?
It’s not a “one size fits all” solution. One symptom can have many different outcomes especially as everyone’s genetics and mental health are different. Equally, two people with similar financial positions could have completely different outcomes based purely on their outlook, views about money and circumstances.
In most instances, financial planning revolves around what a person wants their financial resources to do for them and not what financial product they want or what investment to choose. I have never met a client desperate to establish a pension or invest in the stock market in isolation – there’s always a reason for financial planning. And it is because of the human element in financial planning that robo-advice can’t do the same job that a good financial planner does. Nevertheless, we humans can be terribly inefficient and that’s where a robo-adviser comes into its own. Embrace the two and the financial advisory profession has a dynamite combination.
Some of you may be old enough to remember the film where Robocop replaces human police officers. Whilst Robocop may be efficient and upholds the letter of the law based on the evidence presented to it, would you want to live in a society where robot police officers maintain the law? What if the evidence presented to it was vague or complex, would the outcome be correct?
In the end, our society thrives on human interaction and relationships which can never be fully replaced by technology, however sophisticated.
If you’d like to discuss your own financial affairs, please contact a member of the LFWM team.