The Decline of Robo Advisors

Years ago, if a person had said they were going to offer control of their investment portfolio to a robot, it would have seemed absolutely crazy. Let’s think about the concept on a very basic level: a successful family, business owner or professional has accumulated wealth over time. This is money that was earned through hard work and dedication. It may be several hundred thousand dollars or more – even millions – and their goal is to preserve and grow this wealth for the future. The options are as follows:

  1. Invest the money themselves, without professional help
  2. Invest the money using a computer program (essentially, a robot)
  3. Invest with an experienced wealth advisor who develops personalized investment and financial planning strategies

The answer may seem obvious, but robo-advisors have become a fixture in today’s investment landscape. With their tech-friendly model and slick marketing, it’s no surprise that they have gained attention and experienced a rise in popularity (particularly among young investors). That said, a smart investor knows that “new” doesn’t always mean “better”. Let’s examine some of the reasons robo-advisors gained popularity, and why they appear to be losing some ground back to humans.

The rise and fall of the robo-advisor

The wealth management industry is made of professionals who have built a career on their skill, accomplishments and dedication to clients. While robo-advisors came on the scene as an exciting new option with promises of convenience and minimal fees, this generally comes at a cost. A robot simply cannot do what a human can, and the results are sure to be seen over time.
Common complaints about robo-advisors include a lack of flexibility, accountability, personalization and emotion1. While wealth advisors are often said to take the emotion out of investing, it’s only partly true. Wealth advisors make decisions driven by expertise rather than personal emotions tied to one’s own wealth, but emotions do play a role. An advisor will talk to a client and assess the emotional and the rational in their situation. For example, if a person finds themself with a sudden windfall of money, they may have an immediate reaction and choose to act upon it. A robot will not offer an option on this. However, a wealth advisor will talk out various scenarios and make a rational, strategic recommendation. The recommendation itself isn’t emotional, but it factors in emotional elements as well as the client’s long term plan. No algorithm can offer this personal touch – and as far as flexibility and accountability go? We believe you need that, too.
Here’s a quick anecdote to illustrate our point. When the markets dropped significantly in February 2018, two popular robo-advisor websites crashed2. Clients were unable to access their accounts or make changes to their portfolios until the technical errors were resolved. There were no wealth advisors to call for help – just customer service representatives responding to the technical issue of the website being down. Clients were simply numbers in queue, waiting for website access so they could assess the situation and make decisions – all without the help of a person familiar with their needs, goals or financial history. When your financial future is at stake, this lack of communication, personal care and human connection is more than unsettling.

Relationships matter

The term “robo-advisor” itself is misleading one wealth advisor noted in a recent interview on the subject because these programs do not actually “advise” clients in any way3. While a human advisor will make recommendations based on a client’s individual needs, goals and personal situation, a robot simply invests according to a formula. This essentially removes the “advisor” element completely, leaving only an investment program with zero human interaction or personal communication. Does it invest? Yes. Does it invest based on expertise as well as knowledge about each client’s unique circumstance? Not possible, as the latter never factors in.
At Total Wealth Management, we understand the importance of relationships and know that each client requires personalized financial care. We could punch numbers into a computer and trust that patterns will give us the best investment strategy – but we don’t, and with good reason. Our clients have unique needs that change over time. A robot doesn’t know when someone is getting married (or divorced), has moved to a new city, started a new job or received an inheritance. It doesn’t understand to ask a client if they have elderly parents or dependent children in order to plan for their needs, too. It doesn’t change its strategy based on the human person it’s investing for – and that’s a problem.
The solution? Talk to real people who care – not just about money, but about your health, wealth and happiness.


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Our clients and their families typically have a net worth of $2M or more. If you have an amount under the minimum, we still invite you to get in touch with us to discuss your options.

*Please note that TWM Group does not provide investment advice nor do we solicit or share personal information through public forums or platforms such as social media. Please communicate with us only through official channels like email, the client portal or your portfolio manager.