Technology now touches every aspect of our lives, including investing. And when it comes to wealth management, AI-powered robo advisors have offered a convenient way to manage our money. The advantages to would-be investors – especially first-timers – can be compelling: signing up is easy, investing is flexible, fees are affordable. And robo advisors give investors 24/7 access to manage and modify their portfolios.
What they lack, though, is the ability to advise financial decisions based on broad context and nuance. There’s no human touch, and for many investors, it’s that human advice that elevates and informs long-term investment decisions.
Tackling the Complexities of Wealth Management
The distinction between investment management and wealth management here is crucial. Robo-advisor platforms are great for, say, saving for retirement. In most scenarios, the money isn’t going to be used for decades; it’s invested for growth and doesn’t involve any immediate decision making.
Wealth management, however, is more complex. “You’ve typically got more than one pot of money, and you probably have more than just yourself to worry about,” says Grant Conroy, Portfolio Manager at Genus, “whether it’s family wealth, a family business or other assets.”
While robo-advisors can create a straightforward asset mix that matches an investor’s goals, risk levels and values, human advice is more multifaceted. Advisors are not only assessing geopolitics, economic cycles and interest rates to uncover the right solutions, but they can tailor the solutions to fit your bigger picture and family circumstances. That might mean offering opportunities to diversify into other types of investments, such as impact investing, or support through family estate planning.
Empathy in Investing
As smart as AI is at generating financial projections, it doesn’t have the intelligence to tackle complex portfolios or to empathize with the risks of emotional investing.
Markets will go up and down, especially during a recession or pandemic. Yet nonstop media and 24-hour access to portfolio performance during ups and downs can encourage quick reactions – which may not be in an investor’s best interests over the long term.
Consulting with an advisor offers a rational reset and a buffer from all the noise. “It’s like having a system of checks and balances in place to stop you from possibly making an emotionally driven decision that doesn’t hold with your longer-term aims or goals,” Conroy says.
At the same time, he does embrace technology’s efficiencies and strengths, for example the ability to identify one-off events. “When something is happening that is specific to a client where it changes their financial picture, technology can flag it to allow an advisor to be proactive.”
Aligning Investing Values with Long-Term Outcomes
Although Genus’ portfolio managers rely on analytics to report on the impact of portfolios, the value of human advice comes into play when clients want to talk about wealth in broader terms – particularly when it impacts multiple generations. Conroy points to a recent article¹ in which more than 70 per cent of respondents – Millennials and Gen Xers – say they plan to talk to an advisor when inheriting family wealth.
That means face-to-face discussions and tackling the tough questions together rather than clicking around a computer screen. “It does seem that the younger generation is more comfortable and tech savvy using robo-advisors for their investments. But it’s hard for AI to pick up on human complexity, body language, emotions and everything else that goes into a conversation,” he says. “And that’s a process that takes time.”
Interested in exploring how a wealth manager can help you? Contact a Genus advisor to get started.
[1] Millennials and gen xers want adviser help when inheritance hits: Survey (2022) InvestmentNews. Available at: https://www.investmentnews.com/millennials-and-gen-xers-want-adviser-help-when-inheritance-hits-survey-shows-229878 (Accessed: February 9, 2023).
