Financial Planning

Six Reasons You May Need More Than A Robo-Adviser

Have you ever sat down and discussed your hopes and dreams with a computer? There are some things that algorithms just can’t do.

The new trend in the financial advice business is the rise of the so-called robo-adviser. These are online investing platforms that use computer-generated algorithms (programs, apps, etc.) to create financial strategies and manage your money.

The attraction of these programs is that they are very low cost, don’t ask very hard questions about your finances, and are simple to use. For people in their 20s, who are making their initial investments and don’t have much saved yet, a robo-adviser might work.

So, why do you need a “real life” financial adviser? There are plenty of reasons, actually.

1. They know their clients.

This is a core principle of the financial industry and the legal and regulatory system overseeing all financial advisers, brokers and investment professionals. How well can a computer program really know you? To a computer, everything is either a 1 or a 0. All computers work that way. Can you really reduce your life, your future, your dreams into a series of 1s and 0s?

2. Life happens.

“Real life” financial advisers should provide more than just a financial strategy. Most advisers understand there are things outside our control and, as time passes, our lives change, with good and bad things happening. When crises occur — personal tragedies, hurricanes and other natural devastation — many advisers spend long hours working with clients to get their lives back to normal and helping them figure out how to protect their future. Can a computer do this?

3. Accountability.

Everyone has different purposes for their money. Everyone has different investment needs. Advisers can help you define your wealth strategies and hold you accountable to the strategies you create together. Robo-advisers are designed around simple variables like age, target retirement date, risk tolerance and income level. A computer doesn’t care if you reach your goals.

4. Taxes, taxes and more taxes.

Most retirees have the majority of their money in tax-deferred accounts (401(k)s, IRAs, 403(b)s, etc.). The wrong financial move can create unnecessary tax costs, pulling hard-earned dollars from your portfolio. Robo-adviser platforms are generally only designed to handle portfolio management. They usually are not equipped to offer tax-efficient strategies, nor do they take into consideration insurance, health care or real estate in their automated calculations.

5. Life is about more than investing.

Financial advisers help you prepare for all of life’s important financial milestones: buying a house, paying off debt, funding college, fulfilling a bucket list, taking vacations as well as retirement. Robo-advisers are designed to focus mostly on investing. For clients who rely on real life advisers, comprehensive financial strategies are about much more than just their investment portfolio.

6. Who are you going to call?

Seriously, who are you going to call with a question, a concern, an explanation of what your money is doing for you, and why things are happening in the world, the economy and your portfolio? Real-life advisers are there to educate, to support, to explain and to answer your most important financial questions. I have yet to find the 800 number for my local robo-adviser, and although there are a few “hybrid” robos out there that offer access to human help, that access can be limited, and it comes with higher fees.

Today’s financial professionals and advisers have a major role to play in helping you realize your dreams, and putting you on the path toward achieving your goals so you can have the lifestyle you deserve. You can’t describe your dreams in terms of 1s and 0s.

Is the rise of the robo-advisers a passing fad, like pet rocks, or are they here to stay? Time will tell. One thing’s for sure: a computer program won’t care about you, your family and your future the same as a real-life financial adviser.

Mark Fried is a Chartered Retirement Planning Counselor, lectures on finance at several colleges and has contributed to both local and national publications and TV shows. Mark is an Investment Advisor Representative and insurance professional.

Steve Post contributed to this article.

About the Author

Mark Fried, Investment Adviser Representative

President, TFG Wealth Management

Mark Fried is a Chartered Retirement Planning Counselor, and holds a Bachelor's of Science in Computer Engineering from Columbia University and a Master's in Government from the University of Pennsylvania. Mark contributes to the digital publications of Forbes, Morningstar, Philly Burbs and The Wall Street Journal, USA Today, and the Philadelphia Inquirer. He has been a guest on Fox Business, NBC, WPHL17 and co-hosted a PBS special, How to Select a Financial Advisor. Mark is an Investment Adviser Representative and insurance professional.

Most Popular

5 Beaten-Down Stocks to Buy on the Dip
stocks to buy

5 Beaten-Down Stocks to Buy on the Dip

The market has delivered some nauseating volatility of late. The good news? That has teed up a few great stocks to buy at a discount.
September 27, 2021
10 Best Stocks for Rising Interest Rates

10 Best Stocks for Rising Interest Rates

The 10-year Treasury yield is hovering near its highest level in months. Here are 10 of the best stocks to buy in a rising interest-rate environment.
September 30, 2021
13 States That Tax Social Security Benefits
social security

13 States That Tax Social Security Benefits

You may have dreamed of a tax-free retirement, but if you live in these 13 states, your Social Security benefits are subject to a state tax. That's on…
October 4, 2021


6 Things You Can Do Right Now to Ensure Your Money Will Last in Retirement
retirement planning

6 Things You Can Do Right Now to Ensure Your Money Will Last in Retirement

Your retirement plan needs to take a holistic approach. Because there are so many decisions to make, it’s easy to get lost in the weeds. Follow these …
October 15, 2021
10 Least Tax-Friendly States for Retirees

10 Least Tax-Friendly States for Retirees

When it comes to state and local taxes, retirees in these states are likely to pay more than retirees in other states.
October 14, 2021
Taxes in Retirement: How All 50 States Tax Retirees
Tax Breaks

Taxes in Retirement: How All 50 States Tax Retirees

We rated every state, plus Washington, D.C., on how retirees are taxed. We considered taxes on Social Security and other retirement income, tax exempt…
October 14, 2021
Social Security Earnings Tests: 5 Things You Must Know
social security

Social Security Earnings Tests: 5 Things You Must Know

If you’re still working and claim Social Security early, your benefits could be reduced, at least temporarily.
October 13, 2021