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Why robo-advisers might be the traditional adviser’s best friend

I recently attended a presentation by a Robo-Adviser on ‘The Future of Advice’. If it had taken place in the UK I might have sued under the trade descriptions act.

20-05-2016 | Comments

There was absolutely nothing new about the ‘advice’ side of the business but plenty of interesting stuff on automation. Let’s not beat around the bush, I think automated forms of advice for many people will be an absolute godsend as the regulators and governments in their ‘wisdom’ regulate away the possibility of human advice from many people who desperately need it.

Globally we’re faced with an almighty challenge to overcome illiteracy – financial illiteracy and as long as we have that problem most people won’t be able to help themselves when it comes to their finances. Indeed left to their own devices most people do fuck it up when it comes to such an emotive subject as money. I really wonder what’s going to happen to some of these Robo-advisers when the shit hits the fan and you know it always does. I seriously wonder how happy people will be to follow their account as it is sensibly rebalanced and buying into a falling market without someone there to explain to them why this is sensible.

When people invest they need to be educated, we need to explain to them how they are going to feel when bad things happen to their portfolio and what we’re going to do about it. We don’t need to do it with lots of complicated tables and figures but with pictures and comparisons to other situations in life that they can relate to and we need to be able to listen to how they react and how their emotions are influencing their thinking. That is something that humans do best. Until now I haven’t come across a machine that can compete in that arena.

So why might Robo-Advisers be a traditional adviser’s best friend? Simply because of the rethinking of the technology that we use in finance. I see the technology they are using of being of huge use to traditional advisers by simplifying a multitude of routine tasks and enabling advisers to collect, collate, apply and present data in a manner that is more intuitive, less intrusive and more applicable. As I said in my previous post, in our industry we have become masters of deception and obfuscation. If technology can help remove any of this layer of fog that the industry has set up and makes it easier for people to get sensible advice that they can apply consistently it will be welcome. We have to lower the hurdles that people feel confronted by when seeking financial advice and then we have to lower the hurdles in their way on the path to getting to where they want to with their finances and their lives.

By: Richard Stott, Founding Partner, Connectum

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