The Robots Are Not Ready

Technology is becoming more prominent and useful across the whole of wealth and investment management. Nonetheless, industry-leading research and market practitioners alike strongly suggest: humankind and the marketplace are nowhere near ready to shake free of the human connection.

Robo-advisory, where more and more of investment decision making is being informed by artificial intelligence and then executed and supported on digital platforms is already well-established and certainly still on the rise. BusinessWire, for example, expects a combined average growth rate in robo-advisory services of over 40% between today and 2026.

But it is not enough for investment and retirement planning to be carefully conceived. To be successful a plan must be fully-exercised – emphasis on execution. Here, a Deloitte report on robo-advisory and investment psychology shows that the machines may not be fully up to the task.

Deloitte believes investors may of course be able to obtain valid insights from robo-advisors. But even so, they are left with “fraught” choices. These, the report explains, are decisions that remain “complex and difficult for humans in that they require specialist knowledge, are made infrequently, do not have immediate feedback, and have important effects that are only experienced in the distant future.” Put another way, you may lead a horse to water but you can’t make him drink.

Ryan C. Olds, CFP® professional and principal at Ridgedale Financial Planning LLC in Northeast Ohio “welcomes” the rise of robo-advisory as it serves to, in general, increase knowledge and awareness in wealth management. Such tools can provide new investors with a better understanding of investment fundamentals and concepts. Gamification of financial education and planning can go a long way into helping people see what they have to do to get where they want to go. But, as he explains, such tools tend to fall far short when it comes to execution.

“It is human nature to want a personal connection,” says Olds. “You can go to a robo-advisor and maybe you have an 800 number to call, but you’re probably going to get a different person every time – they don’t know you and you don’t know them. Alternatively, when you’re working with an advisor like me, you can always call directly, but often, you don’t even have to make a call. When conditions change, when there’s something you need to consider, it’s going to be your advisor reaching out to you proactively.”

Olds points to another benefit of working with a human advisor – access to a specialist.

“Wealth and retirement planning is complex enough on its own but in addition, it’s always evolving. One of the things I love about this role is that there’s an intellectual side to this industry. There are so many nuances and strategies, and the regulations and IRS rules are always changing. Because this is such a specialty, I find I’m able to help people – and that’s gratifying to me.”

The human touch in wealth planning often branches out beyond core investment rules and tax regulations. A specialist can often extend to groups of individuals such as teachers, entrepreneurs or medical professionals – where each group faces its own challenges and opportunities.

Because his mother-in-law retired in 2010 as a teacher, his mother retired in 2020 as a special education instructor, and his wife remains a speech therapist – Olds knows a thing or two about the in’s and out’s of retirement planning for education professionals. In particular, he has hands-on knowledge of how to understand and work with public school system benefits and pension programs, such as the Ohio State Teachers Retirement Systems (STRS).

Olds has also developed a strong understanding of the needs of small business owners as they work toward their retirements. He understands the efforts needed just to keep the lights on and so he has developed a financial planning process that enables entrepreneurs to coordinate their business and personal financial plans.

Similarly, for over 15 years, Olds has been working closely with area medical professionals. Again, these face-to-face human interactions result in deep understanding of the needs, goals, and practical challenges and opportunities for another niche segment of clients.

“Hands on coaching can also go a long way to helping people identify the most likely sorts of mistakes that can creep into retirement planning intervening in time for course correction,” said Olds. “For example, people will say to me that they’re just never going in to a nursing home. They can certainly believe that now but I tell them from experience that while it may feel like that is so far away they don’t want to deal with it now, that’s a mistake – you’ve got to think about healthcare planning with your financial planning.”

An often-overlooked element in discussions on healthcare planning, what a client wants from retirement, and a specialist, is the degree to which technology actually elevates the quality of relationships between an advisor and their client. Today, so much of the mechanics and leg work of planning, investing, and reporting can be automated enabling greater strategic focus – more time for discussing the issues that matter most.

It bears repeating: you may lead your horse to water, but you can’t make it drink. A robo-advisory can point to opportunities and strategies. But as the Deloitte report shows, people are notoriously prone to fraught decision making, often putting off what they should be doing. Having an advisor, Olds explains, provides them with coaching and direction that can guide them in their decision making. An advisor will also be there to help clients overcome any lingering hesitation or analysis paralysis.

In the end, says Olds, “I believe it’s good to have access to digital tools where clients can learn as much as they can plus manage their investing as efficiently as possible. But when it comes to retirement planning and execution, the human element is and will remain absolutely essential.”

For more information on Ridgevale Financial Planning, visit: ridgevalefp.com

Ryan Olds is an Investment Advisor Representative with Dynamic Wealth Advisors dba Ridgevale Financial Planning. All investment advisory services are offered through Dynamic Wealth Advisors.