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Worth recently ran an article comparing the value of financial advisors versus robo advisors, breaking down the evaluation into different topics.

  • artificial intelligence 3382507 640 smallAsset Allocation: If an investor is looking at an advisor for just asset allocation services, time is a big factor. Does the investor wasn’t to take the time to research and implement a strategy or pay a professional to do it for them. Investors can hire a robo-advisor to develop an asset allocation stategy, but “they don’t truly educate the clients on their investments,” according to the article.
  • Financial Planning: This is the area where good financial advisors can really shine. While investors can pay to use financial planning software on their own, paying a good advisor is well worth it, according to the article. An advisor that updates a plan with a client, truly understands the client’s whole financial picture—such as investments, insurance, estate planning, etc.—and can altogether truly differentiate themselves from robo advice. The article states that “software is like a great paint brush without the artist.”
  • Estate Planning: As mentioned above, a FA that understands the goals of his/her client can help them in this area as well. “Most good financial planners or advisors use a few [estate planners] and do not get compensated for those referrals, helping to avoid conflicts of interest.” As life events happen, a real life advisor will be able to help clients adapt. “I’ve never met robo-advisors that offer any service like this on an ongoing basis, as an algorithm doesn’t have real-life experience,” according to the article.
  • Taxation: A tax return can give an advisor many clues about a client. A robo advisor simply asks users what tax bracket they’re in. but the software doesn’t know the rest of the picture and what surprises might be coming soon. A robo-advisor doesn’t know a client’s “capital gains situation on outside accounts, therefore it’s not able to harvest losses to offset gains.”
  • Investing in Knowledge: While there may be a place for robo advisors for newer investors, there are limits. A real life advisor understands “the psychology of their clients and help them weather the storm that comes from market volatility and the ever-changing overload of information pushed out on a daily basis by media.”

Read the full article from Worth.

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