Which approach works best for you?

Frequently these days you hear about a “robo advisor.” Exactly what is this and can it replace a human being?

The answer is, it depends on what you are looking for and what you are currently receiving from your service providers.

I believe that the term robo advisor is misleading. Robo advisors, for the most part, are merely digitally offered investment management platforms using computers. There is no human, and no one that you’ll ever build a relationship with in case you have other questions.

Can that work for you? The answer is once again, maybe. If you have an advisor who is hard to get in touch with and who offers no advice to you other than advice about investments, then perhaps your answer is yes.

Many of these types of advisors pitch themselves as financial planners and then do not spend the requisite time to adequately serve in all of the material components of a financial plan beyond just investments or insurance (which they probably sell!)

What I call “Lip Service” financial advisors have lots of concerns over these low cost investment platforms. Of course, the jury will be out with respect to performance.

But for those who have a real proactive and holistic financial advisor – performance isn’t the only indicator of great service. Most scholars in the investment world know two things. Markets go up and markets go down. Some try to be cuter than others with their investment style, hoping to convince you that their style and smarts will be better for you than any other method. Hopefully, that works for them. But the statistics don’t bear that out in that most benchmark comparisons.

At this time, the technology is still pretty much limited to online investment. The greed button of many investors is easily pushed here as the low price is frequently the attractant. But try asking the computer what strings you may consider in your trust to pay for your grandchildren’s education.

This computer guided investment management service may be smart enough to ask you how you would like to own your account as that is required information to establish an account. But it isn’t going to have an intelligent conversation with you, based on the facts and circumstances as they exist on your family today, about the other ownership options that could be more beneficial. Should be a transfer on death account, jointly held or owned in a trust that you would still need to create?

That machine guided portfolio manager also cannot sit with your attorney to help shape the provisions in your trust based on the financial needs of you, your spouse and your survivors.

The message here is simple. First, don’t think that low cost investment management is financial planning. It isn’t. And second, if you work with a lip service advisor who only wants to talk investments or insurance, move it to a robo or get another advisor.