Who is better: humans or AI?
It is common for people to have the misconception that financial consultants exclusively provide assistance to extremely rich individuals and their families; however, this is not the case. Most of the time, they help families who require assistance in planning for retirement, saving for the college expenses of their children, purchasing a home, and taking care of other significant financial goals.
A financial consultant can guide you through the process of making investment decisions and support you in maintaining emotional detachment from your finances, allowing you to formulate the most effective strategy for the long-term management of your wealth. He will assist you in allocating assets into a portfolio that most closely matches the level of risk that you are willing to take on personally.
If you find yourself unexpectedly confronted with a new or even significant change to your financial situation, such as the receipt of a sizable inheritance that you are unsure how to invest, consulting with a financial consultant can assist you in determining what to do with your money and how to address any tax difficulties that may arise as a result of these changes.
It's possible that you are someone who is content with their current financial status; nonetheless, there is no harm in having a second set of eyes check over your financials for you, even if it's only to make sure that they are doing well and that you are invested appropriately. If, on the other hand, the thought of dealing with your finances makes you nauseous and you don't have the foggiest idea how to construct and execute a profitable investment strategy, then you should consider hiring a financial consultant. And if you're having trouble sleeping because of your financial situation or you're worried that you're not making the greatest choices for your money, speaking with a financial consultant might be something you should think about doing.
Although robo-advisors can be of great assistance, in many cases they will not be able to provide you with as much assistance as a real person who engages in face-to-face communication with you would. This is due to the fact that the majority of circumstances are far too individual for an algorithm to handle. It's possible to make the case that using a robo-advisor is an objective approach to make sure your financial services provider isn't trying to sell you their own investment products. The topic of balance is another important consideration. The process of rebalancing your portfolio is a way to maintain the proportion of your assets that are invested in stocks, bonds, and other funds at a level that is consistent with your preferences. You can complete this process on your own or have it performed by your investment advisor; however, a robo advisor does an excellent job of automating this laborious investing task. You have the option of performing this task on your own or having it performed by your investment advisor.
The vast majority of robo adviser platforms do not offer access to CFP® experts in their advisory capacities. If you place a high level of importance on that aspect, then you should make sure that you inquire about it in advance. Despite the many benefits offered by robo advisers, there are certain activities that are better off handled by a human, particularly if you have complex financial requirements and/or a very high net worth. For instance, the procedure for establishing an investor's risk tolerance is founded on scientific concepts and research. Furthermore, most automated investment platforms employ an online questionnaire to analyse an investor's risk tolerance as well as their goals.
The problem of trust also needs to be addressed. In addition to that, it is not something to scoff at. The primary factor that influences a person's decision to seek counsel from you is their level of trust in you. And trust is probably going to be the primary reason that they continue to be one of your clients. When you have confidence in another person, you tend to be lot more honest, forthright, and introspective about topics that you might not be with other people. Money is a touchy subject, and building trust with another person requires 'communicating' with them.
When determining whether to use a human or AI to manage your finances, some of the questions you should ask yourself are, "Do I want someone to just manage my money, or do I also want to be able to talk about my money?" Do I just want an investment management tool, or do I want an investment management tool in addition to a connection with a financial planner?
No matter what you choose to do, the first step is to determine who you are as an investor and what it is you hope to accomplish over the course of time. Whether or not your robo advisor uses a complex algorithm, it is quite unlikely that it will be able to outperform the stock market. But then again… neither will your human advisor. Neither will either of them.