Robo Advisory Ruminations

Is anyone else tired of hearing about robo advisors, yet? We think this is a pretty interesting development, actually. Schwab rolled out a robo platform earlier this year, and we readily hopped on and set up our firm’s portfolios. We have since signed a few clients who pay a reduced fee to be invested in these portfolios.

One of the biggest weaknesses in many folks’ financial plans is simply getting unstuck – making a plan, getting invested, saving regularly, staying invested and such. If an inexpensive robo solution induces more people – young and old – to save, more market participants to access the capital markets, we think this is generally a good development.

But shouldn’t we be afraid of the threat that robo-advisors will take all of our clients?

Hopefully more than a few of our clients read that sentence and shook their heads. We like to remind ourselves, our prospects and our clients that at KH we must earn our keep every day. If we didn’t offer real and meaningful support through the financial planning, advisory, coordination or portfolio management process, we let every client know they can simply call the custodian and end our relationship. We like that idea. If the deal is to simply pile up money and focus on little else, then go robo all the way. However, we think there is value in advice, support, consultation, and issues such as:

  • Assistance transitioning from accumulation to “de-cumulation” and planning to spend from one’s savings
  • Setting up college savings plans and navigating FAFSA rules
  • Critical thinking and planning around asset location, tax strategies and management
  • Coordination and support in the estate planning process
  • Continuous and ongoing risk management in our portfolio process
  • On-call advice, introductions, support and consultation on any aspect of our clients’ financial lives
  • Having a partner to help clients stay the course in their investment and financial lives

But maybe some folks just like robots.

The New York Times recently wrote about The Pros and Cons of Using a Robot as an Investment Adviser. Read for yourself and let us know what you think.