Finance

An era of robo-advisors: how are they helping investors make smarter decisions

Online financial advisor platforms are quite popular today, and they are growing in number each day. These online financial advisors or the robo-advisors, as they are usually known are becoming the second nature of every investment firm and trading company. Almost all online trading companies are resorting to appointing robo-advisors for taking care of their daily clientele. They are adept enough to give financial advice, advice on investing and planning. Since the cost of appointing a robo-advisor is much lower as compared to their human counterpart, they are fast replacing human, financial advisors. While it is keeping the traditional advisors at the edge of their seats, it has some new implications for the human clientele.

Questions you should ask before picking a financial advisor

In case you want to choose a traditional financial advisor, you need to ask yourself a few questions first –

  1. Does the advisor on your shortlist have the qualifications and experience to match your needs?
  2. What is your budget? Once you have to pay for a conventional advisor, will you have enough left for a rewarding investment?
  • How does the advisor charge or accept his fee? Does he charge a flat fee or does he take commissions?
  1. How do you want to interact with your advisor? Do you need frequent advice? Does he charge based on sessions?

In case, you find traditional advisors to be too costly or limiting; you can always try the new generation of online financial advisors.

Are the robo-advisors good enough?

The first question that most stock and share traders ask is if they should trust a robot to handle a majority of their finances. Many people often utilise their retirement funds to buy stocks. Their primary concern is a basic one – are these robots trustworthy enough to replace the human touch traditional financial advisors provide from behind a PC on a desk? They might be at least ten times cheaper, but does that mean they are going to give worthwhile advice?

In 2018, experts and critics expect the funds to flow in into robo-advisor accounts due to the new federal regulations. These are also expected to provide low-cost investment to the customers. Experts expected these firms to collect over $250 billion by the last quarter of 2017. Right now, more people are interested in robo-advisor accounts due to the tax benefits.

Are traditional financial advisors finally being replaced?

Nonetheless, it will be a long time before the robo-advisors can replace the traditional financial advisors. They are still incapable of providing advice based on certain subtleties of the market. They are unable to provide the same level of personalised advice that human professional financial advisors can. They are incapable of intercepting human emotions and fears. The rise and fall of the market involve a lot of human emotion. A traditional adviser can always account for human decisions and help their clients understand the implications by empathising with their clients. Robo-advisers lack the empathy quotient and hence seem rather distant to many traders, who prefer real people to deal with their accounts.

The arguments against robo-advisors

The online advisers are capable of providing excellent, informed decisions based on algorithms and data. They are a result of advances in big data and machine learning. However, they are dependent on the engineers and programmers, who are responsible for designing the algorithms and feeding the data pool. They can only act on a set of data that they can perceive. They lack the human instinct that has proven to be beneficial for several trades in the course of share price history UXC.

During the bear market of the late 2000s, many investors sold out at the bottom during the financial crisis. This was against the advice of their human advisors and the robo-advisors. The ones that did stick it out made a profit after the markets started to climb again in 2009. Right now, in the ninth year of the bull market, the prices are still climbing. The action largely depends on the client and not the advisor.

The final words

You can easily choose a robo-advisor for handling your market investment and finances. They offer more transparency at a reduced price. They are always accessible. Most online platforms offer 24x7x365 advice to their clients. This choice is especially popular among people with smaller accounts, who want to diversify their share portfolio. The robo-advisors offer unbiased financial tips to the clients completely based on their ability and eagerness to invest. They are especially the more attractive option for the younger generation of investors, who tend to rely more on the infallibility of software programmes and tools to decide the course of their monetary investments.

The advent of robo-advisors and the rise of marketing software have made the world of share market and finance more accessible to the youth. The presence of more economic advisors is gradually creating a knack towards share markets among people from all walks of life.