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Robo Advisors have arrived, but life often calls for a Human Touch

Money Matters


After years of development, numerous robo advisors have entered the world of investment management. Still, many investors may not fully understand exactly what robos do, or how they do it. A robo advisor is a digital platform that uses advanced algorithms (based on various financial models and assumptions) to select and manage investments. To keep costs relatively low, portfolios are typically composed of exchange-traded funds (ETFs) and mutual funds that track market indexes. The recommended allocations, available strategies, and various other features can differ significantly from one service to another. To start the process, the investor fills out a standard online questionnaire designed to determine his or her risk tolerance and investment objectives. The software builds a portfolio with a mix of assets that align with the client’s stated short- and long-term financial goals, such as saving for a home purchase, a child’s college expenses, or retirement. This kind of cutting-edge technology may be especially appealing to younger investors, who are more comfortable with managing their lives on electronic devices — and who may not have as much at stake. However, some risks may not be fully understood. Robo advisors have yet to be tested by an economic downturn or times of extreme market volatility, when panicked and/or inexperienced investors may be more likely to abandon their investment strategies without a familiar voice to guide them through the storm.

A financial advisor can provide personalized, face-to-face guidance to clients as they accumulate wealth and their needs become more complex. To put it simply, there are still some critical things that people can do better than computers.

  1. Get to know their clients. The true value of a financial advisor may lie in emotional intelligence and interaction. When personal relationships are formed, advisors gain insight into each client’s unique financial picture, including their priorities, pressing concerns, and psychological tendencies.
  2. Offer more choices & comprehensive service. Robo advisors can manage investment assets for less than the fees normally charged by personal financial advisors. But robo services are typically limited to portfolio management, and their reliance on ETFs and mutual funds means that investors may not have access to individual stocks and bonds, or to some types of alternative investments and strategies.
  3. Provide accountability & perspective. What happens when an investor veers off track and is not making sufficient progress toward his or her stated financial goals? While it may be easy to ignore the recommendations of a robo advisor, it might be more difficult to disregard a trusted advisor. The prospect of regular checkups with a real person who cares about a client’s future might inspire more realistic decisions about spending and saving. A financial advisor typically can keep clients better informed by discussing the financial issues that matter to them, which may help give them more confidence in their decisions.

 – Hal B. Holland, Jr., RFC®

Vice President, Senior Advisor

Vision Financial Group 

4505 Pine Tree Circle, Birmingham, AL 35243

205-970-4909, www.vision-financialgroup.com

Prepared by Broadridge Communication Solutions, Inc. Investment advisory services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor.  Securities offered through ProEquities Inc., a registered broker-dealer and member of FINRA and SIPC.  Vision Financial Group, Inc. and West Alabama Bank are independent of ProEquities, Inc. Securities and insurance products offered are not bank deposits, have no bank guarantee, are not FDIC insured, and may lose value.Prepared for: Save New Client


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