Robo-advisor vs. human advisor


Explaining the benefits of having an in-person advisor

The financial advising industry has been buzzing about the emergence of robo-advisors for the past few years as web-based advising companies such as Betterment and Wealthfront have entered the industry. These online tools attempt to create and manage a client’s portfolio in a fast and inexpensive way.

One of the big appeals of robo-advising for clients is the straightforward and transparent pricing structures that are shown on many of the websites. For Millennials (born between 1980-1995), they may be enticed because the fee structure may be more realistic for a cohort without many assets. For skeptical Gen Xers (born between 1965-1979), fee transparency offered by robo-advising may be attractive.

Although there are a few obvious perks to the robo-advisor model, there are undeniable advantages financial advisors bring to their clients. Tech-savvy Millennials may feel comfortable using an online tool to manage their money; however, there are Millennial attributes that make them ripe for a face-to-face financial advisor.

Gen Xers have an independent spirit and may have the confidence to use online financial tools, but they are in the thick of making very critical financial decisions. A true partner will be more helpful to them than an online tool as they manage the financial implications of their next stage of life.

Explaining the benefits of a financial advisor to a Millennial:

Robo-advisors won't teach you the basics

For Millennials to invest in an independent format, they would first need to feel comfortable being in the driver’s seat of their finances. Study after study has shown financial literacy is greatly lacking among the Millennial generation. Communicate the value you bring by providing explanations and context regarding what is happening with their money. Some of the financial jargon used on robo-advising websites may be enough to scare a Millennial off right away! Additionally, many Millennials are accustomed to mentor relationships. From close relationships to parents, to teachers to coaches, many Millennials expect to have guidance from someone they trust. Financial advisors can capitalize on this need for basic information and mentorship.

Financial advisors customize the approach

Millennials grew up during a time of hyper-customization. Everything from their shoes to their yogurt toppings can be specialized just for them. Many Millennials have the same expectations with personal services. This is a place where human financial advisors shine. No one can create a more customizable experience than another person. By taking the time to get to know your Millennial client, you can customize the tools you use to communicate, the investment strategies you offer, and the advice you bring. An online option cannot provide the same kind of customization.

Explaining the benefits of a financial advisor to a Gen Xer:

Financial advisors can save you time

Gen Xers are in a hectic life stage. They are climbing the corporate ladder or setting out on an entrepreneurial course as they enter their prime earning years. Robo-advising may save them some money, but it requires time they do not have. On top of everything else these Gen Xers have on their plates, taking on the responsibility of managing their finances just may not be realistic. Talk to them about how you can save them time. With you, as the advisor taking the reins on investing, they can spend more time doing the things they love.

Robo-advisors can't offer life guidance

Many Gen Xers are the parents of teenage children. They are dealing with complex financial questions surrounding paying down their mortgage, saving for college and, if there’s money left over, planning for retirement. Gen Xers don’t just need a financial tool; they need a human to ask the tough questions, understand their goals and come up with creative financial solutions. Robo-advising tools can’t ask critical life and financial questions such as: What kind of schools do you want your kids to attend? What would happen if you were to become physically impaired? What do you want your legacy to be? These are the personal, intimate conversations good advisors can lead clients through. Although these deep conversations aren’t the easiest, they can provide peace of mind to clients if they know the big topics are covered. Conversations about money aren’t just about money. They are about the dream trip you want to take for your 10-year anniversary, the house on a lake and the ability to care for loved ones. It takes a great financial advisor to help turn these dreams into a reality.

Although Millennials and Gen Xers may have the ability to utilize online tools to manage money, an in-person financial advisor can add so much more as they navigate through the tumultuous waters of “growing up.” Focus on financial education, customization and personal conversations about long-term goals to help Millennials and Gen Xers understand the clear advantages of financial advisors.

This information is prepared by an unrelated independent third party, BridgeWorks, and is provided for informational purposes only. Ivy Distributors, Inc., believes the information has been obtained from sources considered to be reliable, but does not guarantee the accuracy of the information provided.

IVY INVESTMENTS™ refers to the financial products and services offered by Ivy Distributors, Inc. a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds, and those financial products and services offered by its affiliates.